As filed with the Securities and Exchange Commission on April 30, 1999.
File No. 2-88543
File No. 811-3931
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
Registration Statement Under The Securities Act of 1933 [X]
Pre-Effective Ammendment No. [ ]
Post-Effective Amendment No. 18 [X]
and/or
Registration Statement Under The Investment Company Act of 1940 [X]
Amendment No. 18 [X]
(Check appropriate box or boxes.)
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CLIPPER FUND, INC.
(Exact Name of Registrant as Specified in Charter)
9601 Wilshire Boulevard, Suite 800, Beverly Hills, California 90210
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 776-5033
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JAMES H. GIPSON
9601 Wilshire Boulevard, Suite 800
Beverly Hills, California 90210
(Name and Address of Agent for Service)
Copy to:
Julie Allecta, Esq.
c/o Paul Hastings, Janofsky & Walker LLP
345 California St. 29th Floor
San Francisco, California 94104-2635
(415) 835-1606
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Approximate Date of Proposed Public Offering:
Not applicable
It is proposed that this filing will become effective
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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[CLIPPER FUND(TM) LOGO APPEARS HERE]
CLIPPER FUND(TM)
P R O S P E C T U S
April 30, 1999
This Prospectus outlines information you should know before purchasing
fund shares. You should read and retain this Prospectus for future reference.
The Securities and Exchange Commission has not approved or disapproved of
these securities or passed on the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Risk/Return Summary
Investment Objective/Goals
Principal Investment Strategies
Principal Risks of Investing
Fees and Expenses
Investment Objectives, Principal Investment Strategies and Related Risks
Investment Objectives
Principal Investment Strategies
Investment Philosophy and Process
Related Risks
Management, Organizational and Capital Structure
Investment Adviser to the Fund
Portfolio Managers of the Fund
Shareholder Information
Pricing of Fund Shares
Types of Accounts
Purchase of Fund Shares
Redemption of Fund Shares
Dividends and Distributions
Optional Shareholder Services
Financial Highlights
Investment Objective/Goals
Clipper Fund (the "Fund") is a non-diversified, open-end
management investment company. The objective of the fund is to
provide long-term growth of capital and capital preservation.
This objective is fundamental to the Fund and cannot be changed
without shareholder approval.
Principal Investment Strategies
The Fund seeks to achieve its objectives by concentrating
investments in securities that, in the opinion of the Adviser, are
significantly undervalued. Among such investments, the Fund will
emphasize the purchase of common stock, convertible long-term
corporate debt obligations, convertible preferred stock, and
warrants that the Investment Adviser believes are undervalued and
appear to offer the potential of furthering the Fund's goal of
long-term capital growth.
The Fund may invest in special situations that the Adviser
believes present opportunities for capital growth. A special
situation arises, when in the opinion of the Adviser, the
securities of a particular company will, within a reasonable
estimated period of time, be accorded market recognition at an
appreciated value solely by reason of a development particularly
or uniquely applicable to that company and regardless of general
business conditions or movements of markets as a whole.
If the Adviser is unable to find investments selling at a discount
to their intrinsic value, a significant portion of the Fund's
assets may be invested in cash, similar investments, and bonds. In
the past, the Fund has held as little as 39% of its assets in
equities.
Principal Risks of Investing
The biggest risk is that the Fund's returns may vary, and you
could lose money. If you are considering investing in the Fund,
remember that it is designed for long-term investors who can
accept risks of investing in a concentrated portfolio of
significantly undervalued securities. Common stocks tend to be
more volatile than other investment choices.
The value of the Fund's portfolio may decrease if the share price
of one or more individual companies in the portfolio decreases.
The value of the Fund's portfolio could also decrease if the stock
market goes down. If the value of the Fund's portfolio decreases,
the Fund's net asset value (NAV) may also decrease, which means if
you sell your shares in the Fund you would get back less money
than you originally invested.
The Fund concentrates its investments in securities of companies
that are significantly undervalued relative to the long-term
intrinsic value of the enterprise itself, or in special
situations. Because of this, companies in its portfolio may share
common characteristics and react similarly to market developments.
All securities in which the Fund may invest are inherently subject
to market risk, and the market value of the Fund's investments
will fluctuate. Accordingly, there can be no assurance that the
Fund will achieve its goal of long-term growth of capital with
respect to such investments because any perceived intrinsic values
may never be reflected in the market price of such securities.
An investment in the Fund is not a deposit of the bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
The following information illustrates how the Fund's performance
has varied over time. The bar chart depicts the change in
performance from year-to-year during the period indicated. The
table compares the Fund's average annual returns for the periods
indicated to a broad-based securities index market.
RETURNS
The bar chart and table below provide an indication of the risks
of investing in the Fund by showing changes in the Fund's
performance from year to year over a 10 year period and by showing
how the Fund's average annual returns for one, five, and ten years
compare to those of a broad-based securities market index. How the
Fund performed in the past is not necessarily an indication of how
the Fund will perform in the future.
[BAR CHART]
Clipper Fund(TM)
1989 21.88%
1990 -7.60%
1991 32.09%
1992 15.83%
1993 11.13%
1994 -2.40%
1995 45.19%
1996 19.40%
1997 30.17%
1998 19.20%
During the 10 year period shown in the bar chart, the highest
return for a quarter was 14.2% (quarter ending June 1997) and the lowest return
for a quarter was -15.6% (quarter ending September 1990)
PERFORMANCE TABLE
Average Annual Total Returns
(for the period ending December 31, 1998)
One Year 5 Years 10 Years Inception**
-------- ------- ------- --------
Clipper Fund(TM) 19.2% 21.3% 17.5% 17.8%
S&P 500* 28.6% 24.1% 19.2% 18.4%
*The S&P 500 Index is an unmanaged index of 500 companies widely recognized
as representative of the equity market in general.
**Inception Date: 2/29/84
The Fund's past performance does not necessarily indicate how it
will perform in the future.
Fees and Expenses
The Fund does not charge shareholder transaction fees. However,
the following table illustrates expenses and fees that a shareholder of
the Fund would incur. Transaction fees may be charged if a broker-dealer
or other financial intermediary deals with the Fund on your behalf.
(See "PURCHASE OF FUND SHARES.")
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees 1.00%
Other Expenses 0.06%
----
Total Annual Fund Operating Expenses 1.06%
====
Example
This example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Clipper Fund $108 $337 $585 $1,294
This example should not be considered a representation of past or
future expenses or performance. Actual expenses may be greater or lesser
than those shown.
Investment Objectives, Principal Investment Strategies, and Related Risks
This section takes a closer look at the investment objectives of
the Fund, the principal investment strategies and certain risks of
investing in the Fund. Strategies and policies that are noted as
"fundamental" cannot be changed without a shareholder vote.
Please carefully review the "Risks" section of this prospectus on
page 9 for a discussion of risks associated with certain
investment techniques.
Investment Objectives
The Fund is a non-diversified, open-end management investment
company. The objective of the fund is to provide long-term growth
of capital and preservation of capital. It pursues this objective
by concentrating investments in securities that, in the opinion of
the Adviser, are significantly undervalued. This objective is
fundamental to the Fund and cannot be changed without shareholder
approval. Although the Fund can invest in companies of any size,
it generally invests in larger, more established companies.
The Fund has adopted and will follow certain investment policies
as set forth below, which are fundamental and may not be changed
without shareholder approval. In addition to those stated here,
see "Other Investment Restrictions" in the Statement of Additional
Information, which is available upon request.
1. Concentration of Investments. The Fund will not invest more
than 25%, at time of purchase, of its total assets in the
securities of issuers in any one industry. The Fund will not
invest more than 10%, at time of purchase, of its total assets in
the securities of any one issuer. This restriction does not apply
to investments by the Fund in securities of the U. S. Government
or its agencies or instrumentalities.
2. Restricted and Non Readily Marketable Securities. The Fund
will not invest in restricted securities, including repurchase
agreements maturing in over seven (7) days and securities that do
not have readily available market quotations, if such investment
will cause the then aggregate value of all such securities to
exceed 10% of the value of the Fund's total assets (at the time of
investment, giving effect thereto).
Principal Investment Strategies
The Fund seeks to achieve its objective by concentrating
investments in securities that, in the opinion of the Adviser, are
significantly undervalued. The Fund looks for companies whose
current price does not reflect the long-term intrinsic value of
the business enterprise itself. Among such investments, the Fund
will emphasize the purchase of common stock, convertible long-term
corporate debt obligations, convertible preferred stock, and
warrants that the Adviser believes are undervalued and appear to
offer the potential of furthering the Fund's goal of long-term
capital growth.
The following is designed to help you better understand the Fund's
principal investment philosophy, process, and strategies.
Investment Philosophy and Process
The Adviser will seek to meet the investment objective of the Fund
by investing primarily in securities that are considered by the
Adviser to have potential for long term capital appreciation.
Balance sheet strength and the ability to generate earnings and
free cash flow are the major factors in appraising an investment,
and little weight is given to current dividend income. Investors
should understand that market risks are inherent in all securities
in varying degrees. Therefore, there can be no assurance that the
Adviser will be successful in meeting the investment objective of
the Fund.
As to any specific investment, the Adviser's investment approach
is very research intensive and includes meeting with management,
competitors and customers, and preparing detailed valuation models
for each company researched. The valuation models attempt to
calculate a company's intrinsic value based on private market
transactions and discounted cash flow valuations. The Adviser
focuses on dominant companies generating excess cash flow with
good management in industries that are "out of favor" in the
investment community. However, there can be no assurance that the
judgement of the Adviser as to intrinsic value is correct.
Companies are only added to the Fund when their share price trades
below the Adviser's estimate of intrinsic value. Companies are
sold when their share price reaches the Adviser's estimate of
intrinsic value. This investment discipline is no guarantee by
the Adviser against a loss of capital.
The Adviser believes that concentrated portfolios produce superior
long-term performance. The Adviser concentrates on its best
investment ideas; therefore, the Fund will be more concentrated
than the average equity fund. The Fund is defined as a "non-
diversified" mutual fund. The Fund generally contains 15 to 35
stocks; however, it may contain fewer than 15 stocks or more than
35 stocks if considered prudent by the Adviser. These positions
are generally held for extended periods of time.
Trading
The Adviser uses a disciplined trading strategy for purchasing and
selling securities for the Fund. Price limits for purchasing and
selling securities are established by the Adviser. These price
limits are determined through reference to the intrinsic value of
a security as estimated by the Adviser. Brokerage commissions are
limited to five cents per share or less on any transaction.
Special Situations. The Fund may invest in special situations that
the Adviser believes present opportunities for capital growth. A
special situation arises, when in the opinion of the Adviser, the
securities of a particular company will, within a reasonable
estimated period of time, be accorded market recognition at an
appreciated value solely by reason of a development particularly
or uniquely applicable to that company and regardless of general
business conditions or movements of markets as a whole.
Foreign Securities. The Fund may only purchase foreign securities
that are listed on a principal foreign securities exchange or over-
the-counter market, or are represented by American Depositor
Receipts (ADR's) listed on a domestic securities exchange, or
traded in the United States over-the-counter market. The Fund
will not hold foreign currency as an investment or invest in
foreign currency contracts.
Diversification of Investments. The Fund is a "non-diversified"
Fund and as such is not required to meet the diversification
requirements under the Investment Company Act of 1940, as amended.
The Fund nevertheless intends to comply with the diversification
standards applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended ("the Code").
Cash Positions. If the Adviser is unable to find investments
selling at a discount to their intrinsic value or believes that
market conditions are unfavorable for profitable investing, a
significant portion of the Fund's assets may be invested in cash
or similar investments. In other words, the Fund does not always
stay fully invested in stocks or bonds.
When the Fund's investments in cash or similar investments
increase, the Fund may not participate in market advances or
declines to the same extent that it would if the Fund remained
more fully invested in stocks or bonds.
Other Types of Investments. The Fund may also invest to a lesser
degree in other types of securities and may include:
-- debt securities;
-- high-yield/high-risk securities (up to 25% of the Fund's assets);
-- and/or securities of an issuer in default, including fixed income
and convertible securities (within the same asset limitation).
Related Risks
Because the Fund may invest substantially all of its assets in
common stocks, the main risk is the risk that the value of the
stocks held might decrease in response to activities of an
individual company or in response to general market and/or
economic conditions. If this occurs, a Fund's share price may
also decrease. A Fund's performance may also be affected by risks
specific to certain types of investments, such as foreign
securities.
The biggest risk is that the Fund's returns may vary, and you
could lose money. If you are considering investing in the Fund,
remember that it is designed for long-term investors who can
accept risks of investing in a concentrated portfolio of
significantly undervalued securities. Common stocks tend to be
more volatile than other investment choices.
The value of the Fund's portfolio may decrease if the share price
of one or more individual companies in the portfolio decreases.
The value of the Fund's portfolio could also decrease if the stock
market goes down. If the value of the Fund's portfolio decreases,
the Fund's net asset value (NAV) may also decrease, which means if
you sell your shares in the Fund you would get back less money.
The Fund concentrates its investments in securities of companies
that are significantly undervalued relative to the long-term
intrinsic value of the enterprise itself, or in special
situations. Because of this, companies in the Fund's portfolio may
share common characteristics and react similarly to market
developments. All securities in which the Fund may invest are
inherently subject to market risk, and the market value of the
Fund's investments will fluctuate. Accordingly, there can be no
assurance that the Fund will achieve its goal of long-term growth
of capital with respect to such investments because any perceived
intrinsic values may never be reflected in the market price of
such securities.
An investment in the Fund is not a deposit of the bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
The following is designed to help you better understand some of
the risks of investing in the Fund.
Investments in Smaller or Newer Companies. The Fund may invest in
small or newer companies, which may suffer more significant losses
as well as realize more substantial growth than larger more
established issuers because these smaller or newer companies may
lack depth in management, be unable to generate funds necessary
for growth or potential development, or be developing or marketing
new products or services for which markets may never become
established. In addition, such companies may be insignificant
factors in their industries and may become subject to intense
competition from larger more established companies. Securities of
smaller or newer companies may have more limited trading markets
than the markets for securities of larger, more established
issuers, and may be subject to wide price fluctuations. Investment
in such companies tends to be more volatile and speculative.
Diversification. Diversification is a way to reduce risk by
investing in a broad range of stocks or other securities. The Fund
is a "non-diversified" Fund. A "non-diversified" fund has the
ability to take larger positions in a smaller number of issuers.
Because the appreciation or depreciation of a single stock may
have a greater impact on the NAV of a non-diversified fund, its
share price can be expected to fluctuate more than a comparable
diversified fund. This fluctuation, if significant, may affect the
performance of the Fund.
Industry. Industry risk is the possibility that a group of
related stocks will decline in price due to industry-specific
developments. Companies in the same or similar industries may
share common characteristics and are more likely to react
similarly to industry-specific market or economic developments.
The Fund may at times have significant exposure to companies in a
single industry.
Foreign Securities. The Fund may only purchase foreign securities
that are listed on a principal foreign securities exchange or over-
the-counter market, or are represented by American Depositor
Receipts (ADR's) listed on a domestic securities exchange, or
traded in the United States over-the-counter market. The Fund
will not hold foreign currency as an investment or invest in
foreign currency contracts. Investors should recognize that
investments in foreign companies involve certain considerations
that are not typically associated with investing in domestic
companies. An investment in a foreign security may be affected by
changes in the following:
Currency Rates. As long as the Fund invests in a foreign
security, its value may be affected by the value of the
local currency relative to the U.S. Dollar. When the Fund
sells a foreign denominated security, the security's value
may be worth less in U.S. Dollars even if the security
increases in value in its home country. U.S. dollar
denominated securities of foreign issuers may also is
affected by currency risks. Accordingly, the Fund will not
hold foreign currency as an investment or invest in foreign
currency contracts.
Political and Economic. Foreign investments may be subject
to heightened political and economic risks, particularly in
emerging markets which may have unstable governments,
immature economic structures, and national policies
restricting investments by foreigners, different legal
systems, and economies based on only a few industries. In
some countries, there is the risk that the government may
take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of a
Fund's assets from that country.
Regulatory. There may be less government supervision of
foreign markets. As a result, foreign issuers may not be
subject to uniform accounting, auditing, and financial
reporting standards and practices applicable to domestic
issuers and there may be less publicly available information
about foreign issuers.
Market. Foreign securities markets, particularly those of
emerging market countries, may be less liquid and more
volatile than domestic markets. Certain markets may require
payment before delivery and delays may be encountered in
settling securities transactions. In some foreign markets,
there may not be protection against failure by other parties
to complete transactions.
Transaction Cost. Costs of buying, selling and holding
foreign securities, including brokerage, tax and custody
costs, may be higher than those involved in domestic
transactions.
High-Yield/High-Risk Securities. High-yield/high-risk securities
(or "junk" bonds) are securities rated below investment grade by
the primary rating agencies such as Standard & Poor's and Moody's.
The value of lower quality securities generally is more dependent
on credit risks, or the ability of the issuer to meet interest and
principal payments, than investment grade debt securities.
Issuers of high-yield securities may not be as strong financially
as those issuing bonds with higher credit ratings and are more
vulnerable to real or perceived economic changes, political
changes or adverse developments specific to the issuer.
Portfolio Volatility. The Fund seeks to provide a lower level of
volatility than the stock market, as measured by the S&P 500
Index. The lower volatility sought by the Fund is expected to
result from investments in dividend-paying common stocks and other
equity securities characterized by relatively greater price
stability. The greater price stability sought may be
characteristic of companies that generate above average free cash
flows. A company may use free cash flows for a number of purposes
including commencing or increasing dividend payments, repurchasing
its own stock or retiring outstanding debt. The Fund also
considers growth potential in selecting securities and may hold
securities selected solely for their growth potential.
Please refer to the Statement of Additional Information for a
description of bond rating categories.
Reducing Risk. The Fund attempts to reduce risk principally
through diligent research into the operational and financial risks
of the companies whose stock it holds. A significant discouunt
from intrinisic value is required before purchasing a stock to
achieve a margin of safety. The Fund also will employ significant
positions in cash or bonds when stocks appear to be overvalued.
There is no assurance these attempts to reduce risk to the
portfolio will be successful.
Year 2000. The Fund considers "Year 2000" readiness when selecting
portfolio holdings. However, there is no guarantee that the
information the Fund receives is completely accurate. If a
company has not satisfactorily addressed Year 2000 issues, the
Fund's performance could suffer. The Fund could be adversely
affected if the computer systems used by it, its service providers,
or companies in which it invests do not properly process and calculate
information that relates to dates beginning January 1, 2000, and
beyond. The Fund expects to have its systems ready for the
Year 2000 by mid-1999. In addition, the Fund is actively
assessing the Year 2000 readiness of its service providers, partners,
and companies in whose securities it invests. The Fund will use its best
efforts to minimize the impact of the Year 2000; however, there can be no
assurance that disruptions to the Fund due to the Year 2000 will not occur.
MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE
INVESTMENT ADVISER TO THE FUND
Pacific Financial Research, Inc., ("PFR") (the
"Adviser"), a Massachusetts corporation, is located
at 9601 Wilshire Boulevard, Suite 800, Beverly
Hills, California 90210. The Adviser is a wholly
owned subsidiary of United Asset Management
Corporation ("UAM") and has been providing
investment management services to corporations,
pension funds, endowments, foundations, individuals
and institutions since 1981. As of the date of this
Prospectus, the Adviser had over $6.5 billion in
assets under management.
INVESTMENT ADVISER'S FEE
For the services provided by the Investment Adviser under the
Contract, the Investment Adviser receives from the Fund a
management fee equal to 1% per annum of the Fund's average daily
net asset values. Such fee is higher than that charged by most
other investment management companies. The management fee is
accrued daily in computing the net asset value of a share for the
purpose of determining the offering and redemption price per
share, and is paid to the Investment Adviser at the end of each
month.
PORTFOLIO MANAGERS OF THE FUND
James Gipson - Jim received his B.A. and M.A.
degrees in Economics with honors from the University
of California, Los Angeles, and his M.B.A. degree
with honors from Harvard Business School. He authored Winning the
Investment Game: A Guide for All Seasons. He founded PFR in 1980,
and he currently serves as President and Chairman of the Fund
and is a principal of PFR.
Michael Sandler - Michael received his B.B.A. with
distinction, M.B.A. and J.D. degrees from the
University of Iowa. He joined PFR as an analyst in 1984,
and he currently serves as Vice
President and is a principal of PFR.
Bruce Veaco, CPA - Bruce graduated summa cum laude from
the University of California, Los Angeles with a
B.A. degree in economics. Bruce received his M.B.A. degree from
Harvard Business School before joining PFR in 1986
as an analyst. He currently serves as Vice
President and principal of PFR.
Douglas Grey - Doug received his B.E. cum laude in
Mechanical/Materials Engineering and Economics from
Vanderbilt University, and his M.B.A. from the
University of Chicago. Doug joined PFR as an analyst
in 1986. He currently serves as Vice President and principal of PFR.
Peter Quinn - Peter received his B.S. degree in
Finance from Boston College and his M.B.A. degree
from the Peter F. Drucker School of Management. He
joined PFR as Research Associate in 1987. He
currently serves as Vice President and principal of PFR.
Under an Investment Advisory Agreement (the
"Agreement") with the Fund, the Adviser manages the
investment and reinvestment of the assets of the
Fund. The Adviser must adhere to the stated
investment objectives and policies of the Fund, and
is subject to the control and supervision of the
Fund's Board of Directors.
SHAREHOLDER INFORMATION
This section will help you become familiar with the different
types of accounts you can establish with the Clipper Fund(TM). It
also explains in detail the services and features you can
establish on your account, as well as account fees, policies and
fees that may apply to your account. Account policies (including
fees), services and features may be modified or discontinued
without shareholder approval or prior notice.
PRICING OF FUND SHARES
All purchases and redemption's will be processed at the NAV next
calculated after your request is received and accepted by the
Fund's Transfer and Servicing Agent, National Financial Data
Services ("NFDS"). The Fund's NAV is calculated at the close of
the regular trading session of the ("NYSE") (normally 4:00 p.m.
New York time) each day that the NYSE is open. The NAV of fund
shares is not determined on days that the NYSE is closed
(generally New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas). In order to receive a days price,
your order must be received by the close of the regular trading
session of the NYSE. Securities are valued at market value, or, if
market quotation is not readily available, at their fair value
determined in good faith under procedures established by the Board
of Directors. Short term instruments maturing within 60 days are
valued at amortized cost, which approximate market value. See the
SAI for more detailed information.
TYPES OF ACCOUNTS
REGULAR
Individual or Joint Ownership
One person owns individual accounts. Joint accounts have two or more owners.
A Gift or Transfer to Minor (UGMA or UTMA)
An UGMA/UTMA account is a custodial account managed
for the benefit of a minor. To open an UGMA or UTMA
account, you must include the minor's Social
Security number on the application.
Trust
An established trust can open an account. The names
of each trustee, the name of the trust and the date
of the trust agreement must be included on the application.
Business Accounts
Corporations or Partnerships may also open an
account. An authorized office of the corporation or
a general partner of the partnership must sign the application.
RETIREMENT
Traditional or Roth IRA:
Retirement plans protect investment income and
capital gains from current taxes. Contributions to
these accounts may be tax deductible. Retirement
accounts require special applications. Please refer
to the Fund's Information Kit on IRA's.
Simplified Employee Pension Plan (SEP):
This plan allows small business owners (including
sole proprietors) to make tax-deductible
contributions for themselves and any other eligible
employee(s). Please refer to the Fund's Information Kit on IRA's.
MINIMUM INVESTMENTS
Initial Additional
Regular $5,000 $ 1,000
IRA's $2,000 $ 200
TO BUY SHARES
Shares of the Fund are offered, without charge, at
the NAV per share next determined after
an order is received by the Fund. The minimum
initial investment is $5,000; subsequent investments
are $1,000. The minimum initial investment for all
types of IRA accounts is $2,000; subsequent
investments are $200. The officers of the Fund may
permit exceptions.
Shares of the Funds may be purchased by customers of
brokers-dealers or other financial intermediaries
("Service Agents") who have established a
shareholder servicing relationship with the Fund on
behalf of their customers. Service Agents may
impose additional or different conditions on
purchases or redemptions of Fund shares and may
charge transaction or other account fees.
Shareholders who are customers of Service Agents
should consult their Service Agent for information
regarding these fees and conditions. Service Agents
may receive compensation from the Fund for
shareholder recordkeeping and similar services.
Certain Service Agents may enter into agreements
with the Fund that permits them to confirm orders
for their customers by phone with payment to follow
in accordance with the Transfer Agent's procedures.
If the Transfer Agent does not receive payment, the
transaction may be cancelled and the Service Agent
could be held liable for resulting fees or losses.
Paying for Shares
When buying shares of the Fund, your request
will be processed at the next NAV calculated after
your order is received and accepted at the Transfer
Agent.
Cash, Credit Cards, and Third party checks will
not be accepted.
Purchases must be in U.S. dollars.
Checks must be drawn on U.S. banks and be made
payable to the Clipper Fund, Inc.
BY MAIL
Complete and sign an Account Application and mail it
together with a check made payable to "Clipper Fund, Inc." to:
Clipper Fund, Inc.
C/O National Financial Data Services, Inc.
P.O. Box 419152
Kansas City, MO 64141-6152
Or via overnight
330 W 9th Street, 4th Floor
Kansas City, MO 64105
BY WIRE
Purchases may also be made by wiring money from your
bank account to your Clipper Fund, Inc. account.
Call 1 (800) 432-2504 to receive wiring instructions.
ADDITIONAL PURCHASE INFORMATION
Investments received by the close of regular trading
on the NYSE (generally 4:00 p.m. Eastern Time) will be
invested at the share price calculated after the NYSE closes
on that day. Investments received after the close
of the NYSE will be executed at the price computed
on the next day the NYSE is open. The Fund reserves
the right to suspend the offering of shares of the
Fund or to reject purchase orders when, in the
judgement of management, such suspension or
rejection is in the best interest of the Fund. The
Fund is intended to be a long-term investment
vehicle and is not designed to provide investors
with a means of speculation on short-term market
movements. A pattern of frequent purchases can be
disruptive to efficient Fund management and,
consequently, can be detrimental to a Fund's
performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is
engaged in excessive trading, the Fund, with or
without prior notice, may reject in whole or part
any purchase request with respect to such investor's
account.
Purchases of shares will be made in full and
fractional shares of the Fund calculated to three
decimal places. Certificates for fractional shares
will not be issued. Certificates for whole shares
will only be issued upon written request from the shareholder.
REDEMPTION OF FUND SHARES
You may redeem shares at any time. If shares are
held in certificate form, the certificate must be
returned in order to redeem. When selling shares of
the Clipper Fund, your request will be processed at
the next NAV calculated after your order is received
and accepted at the Transfer Agent.
BY MAIL
Send requests to sell shares directly to the
Transfer Agent. Requests to redeem shares must
include:
(a) share certificates, if issued;
(b) a letter of instruction specifying the number of
shares or dollar amounts to be redeemed,
signed by all registered owners of the
shares in the exact names in which they
are registered;
(c) a signature guarantee (see "SIGNATURE GUARANTEES");
(d) any other necessary legal documents, if required, in
the case of estates, trusts, guardianships, custodians,
corporations, pension and profit sharing plans and other
organizations.
BY TELEPHONE
To sell shares by telephone the following is required:
(a) pre-establishment of the telephone redemption
privilege and wiring instructions (if
applicable) by completing the appropriate
section of the Account Application;
(b) call the Fund's Transfer Agent at (800) 432-2404 by
the close of the regular trading session
of the New York Stock Exchange ("NYSE")
normally 4:00 PM Eastern time.
The Transfer Agent will employ reasonable procedures
to confirm that instructions received by telephone
are valid. The Fund and the Transfer Agent will not
be responsible for any losses resulting from
unauthorized transactions when procedures designed
to verify the identity of the caller are followed.
Note this option is not available for IRA accounts.
ADDITIONAL REDEMPTION INFORMATION
Redemption proceeds may be delayed up to fifteen
(15) days after their purchase, pending verification
that the check has cleared. Payment will normally be
made on the next business day after redemption, but no
later than SEVEN (7)days after the transaction. The
Transfer Agent will wire redemption proceeds only to the
pre-established bank account. During periods of significant
economic or market changes, telephone redemptions may be
difficult to implement. If an investor is unable to
contact the Transfer Agent by telephone at (800) 432-
2504, the redemption request may be delivered to the
Transfer Agent at the address set forth on the back
page of this Prospectus.
The Fund may pay redemption proceeds in whole or in
part by a distribution in-kind of liquid securities
held by the Fund in lieu of cash in conformity with
applicable rules of the SEC. Investors may incur
brokerage charges on the sale of Fund securities
received in payment of redemptions.
An account may be closed after 60-days' written
notice if the account value falls below the minimum
initial investment. You may purchase shares to bring
your account balance above the minimum during the 60-
day grace period. The right of redemption by the
Fund will not apply if the value of your account
drops below the minimum initial investment because
of market performance.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
(a) All written redemptions.
(b) All redemptions where the proceeds are to be
sent to someplace or someone other than the registered
owner's address.
(c) All redemptions that are to be sent via federal wire to a
bank other than your bank of record.
Signature guarantees can be obtained from most banks, credit
unions or savings associations, or from
broker/dealers, national securities exchanges,
registered securities exchanges, registered
securities associations or clearing agencies. Notary
publics cannot provide signature guarantees.
DIVIDENDS AND DISTRIBUTIONS
The Fund will normally distribute substantially all
of its net investment income and any realized net
capital gains, on an annual basis. All dividends
and capital gains distributions will automatically
be reinvested in additional shares unless the Fund
is notified that the shareholder elects to receive
the distributions in cash. Reinvested distributions
receive the same tax treatment as those paid in cash.
SOCIAL SECURITY NUMBER/TAXPAYER IDENTIFICATION NUMBER
To avoid a 31% backup withholding on dividends,
distributions and redemption proceeds, individuals
and other non-exempt share holders must certify
their taxpayer identification number on the
application. If you are subject to backup
withholding or you do not certify your TIN the IRS
requires the Fund to withhold 31% of any redemption
proceeds and any dividends paid.
OPTIONAL SHAREHOLDER SERVICES
AUTOMATIC INVESTMENT PLAN ("AIP")
Shareholders may choose to participate in the Fund's
Automatic Investment Plan. Once the minimum initial
investments have been made, ($5,000 Regular; $2,000
IRA) the shareholder may elect to purchase shares
automatically ($150 minimum monthly investment) at
regular intervals. To establish the AIP, a
shareholder must complete the corresponding section
on the account application. A shareholder may cancel
his/her participation or change the amount of
purchase at any time by calling the Transfer Agent
at (800) 432-2504 or by written notification. The
Fund may modify or terminate this option at any
time, or may charge a service fee.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
Shareholders with a balance of $10,000 may choose to
participate in the Fund's Systematic Withdrawal
Plan. This option allows you to make regular
automatic withdrawals from your account. Withdrawals
are processed on the 10th day of each month. To
establish the SWP, a shareholder must complete the
corresponding section on the account application. A
shareholder may cancel his/her participation or
change the amount of withdrawal at any time by
calling the Transfer Agent at (800) 432-2504 or by
written notification. The Fund may modify or
terminate this option at any time, or may charge a
service fee.
STATEMENTS AND REPORTS
Confirmation statements are sent from the Transfer
Agent after each transaction effecting your share
balance and/or account registration. An annual
statement is sent detailing any dividends or
distributions. The Fund also sends a quarterly
report detailing a list of the Fund's portfolio
holdings.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
the Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in
the table represent the rate that an investor would have earned or lost on
an investment in the Fund assuming reinvestment of all dividends and
distributions. This information has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Fund's financial
statements, are included in the Statement of Additional Information,
which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of period $76.86 $67.57 $60.74 $46.09 $50.02
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 1.64 1.36 0.83 0.76 0.71
Net realized and unrealized
gain (loss) on securities 11.36 19.12 11.10 20.07 (1.93)
------ ------ ----- ----- -----
Total from investment operations 13.00 20.48 11.93 20.83 (1.22)
Less distributions:
Dividends from net
investment income (1.63) (1.36) (0.83) (0.76) (0.71)
Distributions from net
realized gain on securities (12.86) (9.83) (4.27) (5.42) (2.00)
Return of capital - - - - -
------ ------ ------ ------ ------
Net asset value, end of period $75.37 $76.86 $67.57 $60.74 $46.09
====== ====== ====== ====== ======
Total Return 19.2% 30.2% 19.4% 45.2% (2.4%)
Ratios and Supplemental Data:
Net assets ($000's),
end of period $1,232,319 $824,083 $542,753 $403,526 $247,057
Ratio of expenses
to average net assets 1.06% 1.08% 1.08% 1.11% 1.11%
Ratio of net investment income
to average net assets 2.13% 1.84% 1.32% 1.39% 1.41%
Portfolio turnover rate 65% 31% 24% 31% 45%
Number of shares outstanding
at end of period (000's) 16,350 10,721 8,033 6,643 5,360
</TABLE>
- -----------------------------------------------------------------------------
CLIPPER FUND(TM)
9601 Wilshire Boulevard, Suite 800
Beverly Hills, California 90210
Telephone (800) 776-5033 CLIPPER FUND(TM)
Shareholder Services
& Audio Response (800) 432-2504
Internet: www.clipperfund.com
You can request other information about the Fund
including a Statement of Additional Information,
Annual and Semi-Annual Report, free of charge,
by contacting the Clipper Fund(TM) at 1-800-776-5033.
The Fund's annual report will contain a [CLIPPER FUND(TM) LOGO
discussion of the market conditions and investment APPEARS HERE]
strategies that significantly affected the Fund's
performance during their last fiscal year.
Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Also, information on the
operation of the public reference room may be obtained by calling
the Commission at 1-800-SEC-0330. The Fund's reports and other
information are available on the Commission's Internet site at
http://www.sec.gov and copies of this information may be obtained,
upon payment of only a duplicating fee, by writing the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.
Investment Company File No: 811-3931
- ------------------------------------------------------------------------------
===============================================================================
[CLIPPER FUND(TM) LOGO APPEARS HERE]
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus but is to
be read in conjunction with the Prospectus for Clipper Fund(TM) ("Fund")
dated April 30, 1999. A copy of the Prospectus may be obtained from
Clipper Fund(TM), 9601 Wilshire Boulevard,Suite 800, Beverly Hills,
California 90210.
- -----------------------------------------------------------------------------
April 30, 1999
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES...............................2
OTHER INVESTMENT RESTRICTIONS...................................4
MANAGEMENT OF THE FUND..........................................5
PRINCIPAL SHAREHOLDERS OF SECURITIES............................7
INVESTMENT ADVISORY AND OTHER SERVICES..........................9
MISCELLANEOUS INFORMATION.......................................11
BROKERAGE ALLOCATION AND OTHER PRACTICES........................11
CAPITAL STOCK AND OTHER SECURITIES..............................12
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED....13
TAX STATUS......................................................15
PERFORMANCE INFORMATION.........................................16
FINANCIAL STATEMENTS............................................17
Investment Objective and Policies.
In order to earn a return on uninvested assets, or to meet anticipated
redemptions, or for temporary defensive purposes,the Fund may invest a
portion of its assets in domestic and foreign money market instruments
that include certificates of deposit, bankers'acceptances, time deposits,
U.S. Government obligations, U.S. Government agency securities, short-term
corporate debt securities, and commercial paper rated A-1 or A-2 by
Standard & Poor's Ratings Services or Prime-1 or Prime-2 by Moody's Investors
Service or if unrated, determined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by the
Fund, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of the Fund. The
Fund will not invest in any security issued by a commercial bank unless:
(i) the bank has total assets of at least $1 billion, or the
equivalent in other currencies.
(ii) in the case of U.S. banks, it is a member of the Federal
Deposit Insurance Corporation.
(iii) in the case of foreign branches of U.S. banks, the security
is, in the opinion of the Adviser, of an investment quality
comparable with other debt securities that may be purchased
by the Fund.
The Fund may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers'
acceptances and other securities. In a repurchase agreement, the Fund buys a
security and simultaneously commits to sell that security back at an agreed
upon price plus an agreed upon market rate of interest. Under a repurchase
agreement, the seller is required to maintain the value of securities, subject
to the agreement, at 100% of the repurchase price. The value of the
securities will be evaluated daily, and the Adviser will, if necessary,
require the seller to maintain additional securities to ensure that the value
is in compliance with the previous sentence. The use of repurchase agreements
involves certain risks. A default by the seller of the agreement may cause the
Fund to experience a loss or delay in the liquidation of the collateral
securing the repurchase agreement. The Fund might also incur disposition costs
in liquidating the collateral.
LENDING OF SECURITIES. While the Fund currently does not lend its portfolio
securities, and has no present intention to lend in excess of 10% of its
portfolio securities, it reserves the right to lend up to 30% of its portfolio
securities. The Adviser may lend to broker-dealers, major banks or other
recognized domestic institutional borrowers of securities who are not
affiliated with the Adviser and whose creditworthiness is acceptable in order
to generate additional income. The borrower must deliver to the Fund cash or
cash equivalent collateral equal in value to at least 100% of the value of the
securities loaned at all times during the loan. During the time the portfolio
securities are on loan, the borrower pays the Fund any interest or dividends
paid on such securities. The Fund may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of interest income
if the borrower has delivered equivalent collateral.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Fund may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. When-issued or forward delivery
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When
issued and forward delivery transactions may be expected to occur a month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market that will
occur sometime in the future. No payment or delivery is made by the Fund until
it receives payment or delivery from the other party to any of the above
transactions. It is possible that the market price of the securities at the
time of delivery may be higher or lower than the purchase price. The Fund will
maintain a separate account of cash or liquid securities at least equal to the
value of purchase commitments until payment is made. Such segregated securities
will either mature or, if necessary, be sold on or before the settlement date.
Typically, no income accrues on securities purchased on a delayed delivery
basis prior to the time delivery is made although the Fund may earn income on
securities it has deposited in a segregated account. The Fund engages in these
types of purchases in order to buy securities that fit with its investment
objectives at attractive prices - not to increase its investment leverage.
FUND TURNOVER
The Fund turnover rate is not expected to exceed 75%. In addition to trading
costs, higher rates of Fund turnover may result in the realization of capital
gains. The Fund will not normally engage in short-term trading, but reserves
the right to do so.
INVESTMENT COMPANIES The Fund reserves the right to invest up to 10% of its
total assets, calculated at the time of investment, in the securities of other
open-end or closed-end investment companies. No more than 5% of the investing
Fund's total assets may be invested in the securities of any one investment
company nor may it acquire more than 3% of the voting securities of any other
investment company. The Fund will indirectly bear its proportionate share of
any management fee paid by the investment company in which the Fund has
invested.
OTHER INVESTMENT RESTRICTIONS
The Fund will not:
(a) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) a continuous
operating history of less than 3 years;
(b) invest more than 25% of its assets within a single industry; however,
there are no limitations on investments issued or guaranteed by the U.S.
Government and its agencies when the Fund adopts a temporary defensive
position;
(c) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agreements
or by lending its Fund securities to banks, brokers, dealers and other
financial institutions so long as loans are made in compliance with the
1940 Act, as amended, or the rules and regulations or interpretations of
the SEC;
(d) (1) borrow, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in excess of
33 1/3% of the Fund's gross assets valued at the lower market or cost, and
(2) the Fund may not purchase additional securities when borrowings exceed
5% of total assets; or
(e) pledge, mortgage or hypothecate any of its assets to an extent greater
than 33 1/3% of its total assets at fair market value.
MANAGEMENT OF THE FUND
The Fund's Board of Directors manages the business and affairs of the Fund
and exercises all corporate powers, except what it delegates to the
management of the Fund. However, the Board retains the power to hold
management accountable for all its actions. Each director is expected to
carry out specific duties under the Investment Company Act of 1940 and
State Statutes, as applicable. The Board may delegate the management of the
day-to-day operation of the Fund to its officers.
Each director owes the Fund a duty of care. The duty of care requires
that a director act with that degree of diligence, care, and skill that a
person of ordinary prudence would exercise under similar circumstances in a
like position and in a manner he or she reasonably believes is in the best
interests of the Fund.
Each director owes a duty of loyalty. The duty of loyalty requires that the
director act in good faith, avoid unfair dealing, and resolve conflicts of
interest in favor of the Fund and its shareholders.
In addition to these broad duties, the Board of Directors is responsible
for the selection of the company's principal officers, the declaration of
dividends, the setting of dates for shareholder meetings, and the setting of
record dates for shareholders entitled to receive dividends or to vote at
shareholder meetings.
The directors and officers of the Fund and their principal occupations during
the recent past are shown below.
Principal Occupation(s)
Name, Address, Age Position(s) Held with Fund During Past 5 Years
- ---------------- -------------------------- ------------------------
James H. Gipson* (56) Director, Chairman Mr. Gipson has been
9601 Wilshire Blvd. and President President of PFR, an
Suite 800 investment management
Beverly Hills, CA 90210 firm and the Investment
Adviser, since 1980.
(See "Investment Advisory
Contract") Prior to 1980,
he was a portfolio manager
with Batterymarch
Financial Company and
with other investment
firms.
Michael Kromm (53) Secretary/Treasurer Mr. Kromm has been with
9601 Wilshire Blvd. PFR since 1990 and is
Suite 800 presently its Operations
Beverly Hills, CA 90210 Manager. From 1987 to
1990, he worked for the
RNC Mutual Fund Group as
Chief Financial Officer
and Secretary. Prior to
that, he worked in
industry, as a controller,
and for a CPA firm.
Norman B. Williamson (67) Director Mr. Wiliamson had been a
1245 Rosalind Vice President and
San Marino, CA 91108 Portfolio Manager with PFR
since 1983 prior to his
retirement December 31,
1990. From 1980 to 1983,
he was self-employed as an
investment manager. Prior
to that, he was Assistant
Treasurer and Manager of
Pension Trust
Administration for FMC
Corp.
Lawrence P. McNamee (64) Director Professor McNamee has been
3531 Boelter Hall, UCLA a Professor of Computer
Los Angeles, CA 90024 Science at UCLA since
1966.
F. Otis Booth, Jr. (75) Director Mr. Booth has been a
10877 Wilshire Blvd. private investor and
Suite 1407 rancher from 1973 to the
Los Angeles, CA 90024 present.
*Director who is an interested person, as defined in the Investment Company Act
of 1940, as amended, by virtue of an affiliation with the Investment Adviser.
Information about the management of the Fund is contained in the Prospectus
under "Management." Compensation paid to the Management was as follows for the
year ended December 31, 1998:
<TABLE>
<CAPTION>
COMPENSATION TABLE
==================================================================================================
(1) (2) (3) (4) (5)
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from Registrant and
Name of Person, Compensation as Part of the Fund Benefits Upon Fund Complex
Position from Registrant Expenses Retirement Paid to Directors (a)
<S> <C> <C> <C> <C>
James H. Gipson
Director, Chairman,
and President None None None None
Norman B. Williamson
Director $5,000 None None $5,000
Lawrence P. McNamee
Director $5,000 None None $5,000
F. Otis Booth, Jr.
Director $5,000 None None $5,000
Michael C. Sandler
Vice President None None None None
Michael Kromm
Secretary
and Treasurer None None None None
(a) Total 1998 Compensation from the Registrant and the Fund Complex consists
of compensation paid to directors and trustees by Clipper Fund, Inc.
</TABLE>
PRINCIPAL SHAREHOLDERS OF SECURITIES
The following is information about persons known to the Fund to be record
owners of five percent or more of the outstanding shares of the capital stock
of the Fund as of March 31, 1999:
Number of
Shares Owned Percent
Name and Address of Record of Class
- --------------------------------- -------------- ----------
Charles Schwab & Co. Inc. (1) 3,504,749 21.7%
Attention: Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104
Merrill Lynch Group Employee Services (2) 833,601 5.2%
Merrill Lynch Trust Co. TTEF
FBO Qualified Retirement Plans
U/A 01/01/97
265 Davidson Ave. 4th Floor
Somerset, NJ 08873-4120
National Financial Service Corp. (3) 818,441 5.1%
P.O. Box 3908
Church Street Station
New York, N.Y. 10008
- ------------------------
1. Charles Schwab & Co. Inc. is the nominee account for many individual
shareholder accounts; the Fund is not aware of the size or identity of
any of the individual accounts.
2. Merrill Lynch is the trustee for a company sponsored retirement plan.
The plan is the Bozell, Jacobs, Kenyon & Eckhardt, Inc. Profit Sharing
Retirement Plan, 800 Blackstone Centre, 302 South 36th Street, Omaha,
Nebraska 68131.
3. National Financial Services Corp. is the nominee account for many
individual shareholder accounts; the Fund is not aware of the size or
identity of any of the individual accounts.
All directors and officers of the Fund as a group (6 persons) owned
beneficially 250,723 shares of the Capital stock on March 31, 1999,
approximating 1.5% of the outstanding shares. That number consists of an
aggregate of 102,727 shares held by the Pacific Financial Research, Inc. Money
Purchase Plan and Trust; 8,876 shares held by the Pacific Financial Research,
Employees Savings Plan, 23,927 shares held by Mr. F. Otis Booth, Jr., 77,544
shares held by Mr. Gipson, 18,341 shares held by Mr. Williamson in an IRA
plan, 2,547 shares held by Mr. & Mrs. Kromm, of which 2,113 are held in an
IRA plan and 11,555 shares held by Professor McNamee, of which 1,309 shares
are held in IRA plans and 10,246 shares are held in Trust, and 5,207 shares
are held by Mr. Sandler, of which 1,526 shares are held in IRA plans.
INVESTMENT ADVISORY AND
OTHER SERVICES
Certain information regarding investment advisory and other services is in
the Fund's Prospectus. Additional information follows:
The Investment Adviser
PFR (the "Investment Adviser") is a registered investment adviser with the
Securities and Exchange Commission under the Investment Advisers Act of 1940.
Registration as a registered investment adviser does not involve supervision of
management or investment practices and policies by the Securities and Exchange
Commission. James H. Gipson, President and a Director of the Fund, is
President of the Investment Adviser, a wholly owned subsidiary of United
Asset Management Corporation. See "Investment Advisory Contract" in the
prospectus dated April 30, 1999.
The Investment Advisory Contract
The Investment Advisory Contract (the "Contract") between the Fund and the
Investment Adviser has been approved by the Board of Directors of the Fund,
including a majority of the Fund's directors who were not a party to the
Contract or interested persons of a party to the Contract, and by the vote of a
majority of the outstanding voting shares of the Fund. Under the Contract,
the Investment Adviser (i) manages the investment operations of the Fund and
the composition of its portfolio, including the purchase, retention and
disposition of securities, in accordance with the Fund's investment objective,
(ii) provides all statistical, economic and financial information reasonably
required by the Fund and reasonably available to the Investment Adviser,
(iii) maintains all required books and records with respect to the Fund's
securities transactions and provides such periodic and special reports as
reasonably requested by the Fund's Board of Directors, (iv) provides the
custodian of the Fund's securities on each business day with a list of trades
for that day, and (v) provides persons satisfactory to the Fund's Board of
Directors to act as officers and employees of the Fund.
Also under the Contract, the Investment Adviser is responsible for (i)
the compensation of any of the Fund's directors, officers and employees who
are interested persons of the Investment Adviser or its affiliates (other than
by reason of being directors, officers or employees of the Fund), (ii) expenses
of printing and distributing the Fund's Prospectus and sales and advertising
materials to prospective clients. The Fund is responsible and has assumed the
obligation for payment of all of its other expenses including (a) brokerage and
commission expenses, (b) federal, state or local taxes, including issue and
transfer taxes, incurred by or levied on the Fund, (c) interest charges on
borrowings, (d) compensation of any of the Fund's directors, officers or
employees who are not interested persons of the Investment Adviser or its
affiliates, (e) charges and expenses of the Fund's custodian, transfer and
dividend paying agent and registrar, (f) all costs associated with shareholders
meetings and the preparation and dissemination of proxy solicitation
materials except for meetings called solely for the Investment Adviser's
benefit, (g) legal and auditing expenses, (h) printing and distribution of
the Fund's Prospectus and other shareholder information to existing
shareholders, (i) payment of all investment advisory fees, (j) fees and
expenses of registering the Fund's shares under the appropriate federal
securities laws and of qualifying its shares under applicable state Blue Sky
laws, including expenses attendant upon renewing and increasing such
registrations and qualifications, (k) insurance premiums on the Fund's
property and personnel, including the fidelity bond and liability insurance for
officers and directors, (l) accounting and bookkeeping costs and expenses
necessary to maintain the Fund's books and records as required by the 1940
Act, including the pricing of the Fund's portfolio securities and the
calculation of its daily net asset value, and (m) any extraordinary and
non-recurring expenses, except as otherwise prescribed herein.
The Contract, as continued, is effective through March 31, 2000.
Thereafter, it may be continued for successive periods not to exceed one
year, provided that such continuance is specifically approved annually by
vote of a majority of the Fund's outstanding voting securities or by the
Fund's Board of Directors; and by a majority of the Fund's Board of Directors
who are not parties to the Contract or interested persons of any such party, in
person at a meeting called for the purpose of voting on such approval.
The Investment Adviser's fees payable to it by the Fund will be reduced
by the amount, if any, by which the Fund's annual operating expenses,
expressed as a percentage of average daily net assets, exceed the most
restrictive limitation imposed by any state in which the Fund's shares are then
qualified for sale. Computation of this limitation is made monthly during the
Fund's fiscal year on the basis of the average daily net asset values and
operating expenses to that point during such year, and the amount of the
excess, if any, over the prorated amount of the expense limitation is
deducted from such monthly payment of the management fee, after taking into
account, however, any previous monthly payments under the operating expense
limitation during such fiscal year. In addition, in the event that the Fund
does not generate sufficient income to cover its expenses, the Investment
Adviser may at its discretion pay from the Investment Adviser's own funds
more than required of it by the most restrictive applicable state limitation.
Operating expenses for the purposes of the Contract include the Investment
Adviser's management fee but do not include (a) brokerage and commission
expenses, (b) federal, state and local taxes, including issue and transfer
taxes, incurred by or levied on the Fund and (c) interest charges on
borrowings. The Contract is terminable on 60 days written notice by vote of a
majority of the Fund's outstanding shares or by vote of a majority of the
Fund's entire Board of Directors, or by the Investment Adviser on 60 days
written notice, and automatically terminates in the event of its assignment.
The Contract provides that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Investment Adviser, or of reckless
disregard of its obligations thereunder, the Investment Adviser is not liable
for any action or failure to act in accordance with its duties thereunder.
The Investment Adviser may act as an investment adviser to other persons,
firms or corporations (including investment companies), and has numerous
advisory clients besides the Fund, one of which is a registered investment
company.
The Fund's investment advisory fee to the Investment Adviser was
$9,994,778, $6,891,228 and $4,745,682 for the years ended December 31, 1998,
1997, and 1996, respectively. This fee equals 1% of the average daily net
assets of the Fund for the year.
MISCELLANEOUS INFORMATION
State Street Bank and Trust Company, Post Office Box 1713, Mutual Funds
Operations-P2N, Boston, Massachusetts, 02105, acts as the custodian of the
securities and other assets of the Fund.
Ernst & Young LLP, 725 South Figueroa Street, Los Angeles, California,
90017-5418, are the Fund's independent auditors.
National Financial Data Services, 330 W. 9th St. 4th Floor Kansas City,
MO 64105 acts as the transfer agent for the Fund.
BROKERAGE ALLOCATION AND
OTHER PRACTICES
The Investment Adviser will furnish advice and recommendations with respect to
the Fund's portfolio decisions and, subject to the instructions of the Board of
Directors of the Fund, will determine the broker to be used in each specific
transaction. In executing the Fund's portfolio transactions, the Investment
Adviser seeks to obtain the best net results for the Fund, taking into account
such factors as the overall net economic result to the Fund (involving both
price paid or received and any commissions and other costs paid), the
efficiency with which the specific transaction is effected, the ability to
effect the transaction where a large block is involved, the known practices
of brokers and their availability to execute possibly difficult transactions
in the future and the financial strength and stability of the broker. While the
Investment Adviser generally seeks reasonably competitive commission rates, the
Fund does not necessarily pay the lowest commission or spread available. The
Fund and the Investment Adviser may direct the Fund's portfolio transactions to
persons or firms because of research and investment services provided by such
person or firm if the amount of commissions for effecting the transactions is
reasonable in relation to the value of the investment information provided by
those persons or firms. Such research and investment services are those which
brokerage houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies and
industries. These services may be used by the Investment Adviser in connection
with all of its investment activities, and some of the services obtained in
connection with the execution of transactions for the Fund may be used in
managing the Investment Adviser's other investment accounts.
The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the "third market" (i.e., otherwise
than on the exchanges on which the securities are listed). When transactions
are executed in the over-the-counter market or the third market, the
Investment Adviser will seek to deal with primary market makers and to execute
transactions on the Fund's own behalf, except in those circumstances where, in
the opinion of the Investment Adviser, better prices and executions may be
available elsewhere. The Fund does not allocate brokerage business in return
for sales of the Fund's shares.
Neither the Investment Adviser nor any affiliated person thereof will
participate in commissions paid by the Fund to brokers or dealers or will
receive any reciprocal business, directly or indirectly, as a result of such
commissions.
The Board of Directors reviews periodically the allocation of brokerage
orders to monitor the operation of these policies.
The aggregate amounts of brokerage commissions paid by the Fund were
$1,359,729, $316,753, and $254,824, for the years ended December 31, 1998,
1997, and 1996, respectively. During the year ended December 31, 1998, the
total amount of transactions and related commissions with respect to which the
Fund directed brokerage transactions was $234,766,071 and $152,378,
respectively. The amount of these directed commissions that was applied as
credit against custody bills by the Fund's custodian, and accounted for on the
accrual basis, amounted to $152,378, to the benefit of the Fund only. All
trades are placed with brokers on a best execution basis.
CAPITAL STOCK AND
OTHER SECURITIES
The authorized capital stock of the Fund consists solely of 200,000,000 shares
of capital stock having no par value. Each of the Fund's shares has equal
dividend, distribution, liquidation and voting rights. Holders of the Fund's
shares have no conversion or pre-emptive rights. All shares of the Fund when
duly issued will be fully paid and non-assessable. The rights of the holders of
shares of capital stock may not be modified except by vote of the holders of a
majority of the outstanding shares. The Articles of Incorporation of the Fund
give the Fund the right to redeem shares of capital stock evidenced by any
stock certificate presented for transfer at the aggregate net asset value per
share. Holders of Capital stock are entitled to one vote per share on all
matters voted upon by the Fund's shareholders. In addition, the Fund's shares
have cumulative voting rights in the election of directors. This means that a
shareholder may cumulate votes by multiplying the number of shares which the
shareholder holds by the number of directors to be elected and casting all such
votes for one candidate or distributing them among any two or more candidates.
In order to cumulate votes, a shareholder must give notice of the shareholder's
intention to cumulate votes at the meeting and prior to the voting, and the
candidates' names must have been placed in nomination prior to the commencement
of voting. If any one shareholder has given notice as described above, then all
shareholders may cumulate their votes for candidates in nomination.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
Certain information regarding the purchase and redemption of the Fund's capital
shares is contained under the captions "Purchase of Shares," "Redemption of
Shares," and "Determination of Net Asset Value" in the Prospectus. Additional
information follows:
Determination of Net Asset Value
The federal holidays on which net asset value will not be determined are: New
Year's Day, Martin Luther King Day, Presidents' Day, Good FridayMemorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Valuation of Assets in Determining Net Asset Value
In valuing the Fund's assets for the purpose of determining net asset value,
readily marketable portfolio securities listed on the New York Stock Exchange
are valued at the last sale price on such Exchange on the business day as of
which such value is being determined. If there has been no sale on such
Exchange on such day, the security is valued at the closing bid price on such
day. If no bid price is quoted on such Exchange on such day, then the security
is valued by such method as the Board of Directors of the Fund shall determine
in good faith to reflect its fair value. Readily marketable securities not
listed on the New York Stock Exchange but listed on other national securities
exchanges are valued in like manner. Readily marketable securities traded only
in the over-the-counter market are valued at the current bid price. If no bid
price is quoted on such day, then the security is valued by such method as the
Board of Directors of the Fund shall determine in good faith to reflect its
fair value. All other assets of the Fund, including restricted and not readily
marketable securities, are valued in such manner as the Board of Directors of
the Fund in good faith deems appropriate to reflect their fair value.
Purchase of Shares
Orders for shares received by the Fund prior to the close of business on the
New York Stock Exchange on each day during such periods that the Exchange is
open for trading are priced at net asset value per share computed as of the
close of the Exchange on that day. Orders received after the close of the New
York Stock Exchange or on a day it is not open for trading are priced at the
close of such Exchange on the next day on which it is open for trading at the
next determined net asset value per share. The initial investment by an
investor must be in an amount of $5,000 or more, except that the minimum
investment in an Individual Retirement Account ("IRA") is $2,000. Each
additional investment by a shareholder must be at least $1,000 ($200 for IRA
accounts) except through dividend reinvestment. The automatic Investment Plan
has a minimum monthly investment of $150; however the initial minimum
investment is not lowered. The minimum may be waived for other investors at the
Investment Adviser's discretion.
TAX STATUS
Information about the tax status of the Fund and certain federal income tax
consequences to Fund shareholders is contained in the Prospectus under
"Dividends, Distributions, and Taxes."
Corporate shareholders should also be aware that availability of the
dividends received deduction for a portion of the Fund's distributions is
subject to certain restrictions. For example, the deduction is not available if
Fund shares are deemed to have been held for less than 46 days and is reduced
to the extent such shares are treated as debt-financed under the Internal
Revenue Code of 1986, as amended, (the "Code"). Dividends, including the
portions thereof qualifying for the dividends received deduction, are
includible in the tax base on which the federal alternative minimum tax is
computed. Dividends of sufficient aggregate amount received during a prescribed
period of time and qualifying for the dividends received deduction may be
treated as "extraordinary dividends" under the Code, resulting in a reduction
in a corporate shareholder's federal tax basis in its Fund shares.
A foreign tax credit or deduction is generally allowed for foreign taxes
paid or deemed to be paid. A regulated investment company may elect to have the
foreign tax credit or deduction claimed by the shareholders rather than the
company if certain requirements are met, including the requirement that more
than 50% of the value of the company's total assets at the end of the taxable
year consists of securities in foreign corporations. Since the Fund does not
anticipate investment in securities of foreign corporations to this extent, the
Fund will likely not be able to make this election and foreign tax credits will
be allowed only to reduce the Fund's tax liability, if any. Shareholders who
are not U.S. persons under the Code should consult their advisers regarding the
applicability of U.S. withholding taxes to Fund distributions and the effect of
foreign tax laws.
Generally, the Code's rules regarding the determination and character of
gain or loss on the sale of a capital asset apply to a sale, redemption or
repurchase of shares of the Fund that are held by the shareholder as capital
assets. A loss on the sale of shares of the Fund held for six months or less is
treated as a long-term capital loss to the extent that distributions on such
shares were treated as long-term capital gains. Provided that the Fund
qualifies as a regulated investment company under the Code, it will not be
liable for California corporate taxes, other than a minimum franchise tax, if
substantially all of its income is distributed to shareholders for each taxable
year.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency dominated securities are
subject to Section 988 of the Code, which may cause gains and losses to be
treated as ordinary income and losses rather than capital gains and losses and
may affect the amount, timing and character of distributions to shareholders.
The discussions herein and in the Prospectus have been prepared by the
management of the Fund, are general in nature and do not purport to be a
complete description of all tax implications on an investment in the fund;
counsel to the Fund has expressed no opinion in respect therein. Investors
should consult their own tax advisers for further details and for the
application of federal, state and local tax laws to their particular
situations.
PERFORMANCE INFORMATION
A description explaining the methodology and relevance of certain historical
performance presentations is contained in the Prospectus under "Performance
Information."
Performance information for the Fund may be compared, to: (i) the Dow Jones
Industrial Average (the "DJIA"), an unmanaged weighted average of 30 large
industrial corporations, (ii) the Standard & Poor's 500 Stock Index (the "S&P
500"), an unmanaged index of 500 industrial, transportation, utility and
financial companies, and (iii) the Consumer Price Index (the "CPI"), a
statistical measure of change, over time, in the price of goods and services in
major expenditure groups (such as food, housing, apparel, transportation,
medical care, entertainment, and other goods and services) typically purchased
by urban consumers. Neither the DJIA nor the S&P 500 is necessarily typical of
the type of investments made by the Fund. Further, the CPI essentially
measures the purchasing power of consumers' dollars by comparing the costs of
goods and services today with the costs of the same goods and services at an
earlier date.
Additionally, the Fund's total returns are based on the overall dollar or
percentage change in value of a hypothetical investment in the Fund, assuming
all dividends and distributions are reinvested. A cumulative total return
reflects the Fund's performance over a stated period of time or since its
inception. An average annual compounding rate reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period
presented. Because average annual compounded returns tend to smooth out
variations in the Fund's returns, investors should recognize that they are not
the same as actual year-by-year returns.
For the purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements, performance may be stated in terms of total return. Under
regulations adopted by the Securities and Exchange Commission ("SEC"), funds
that intend to advertise performance must include total return quotations
calculated according to the following formula:
P (1 + T)n= ERV
Where:
P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year periods, at the
end of such period (or fractional portion thereof.)
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5, and 10 year periods of the Fund's existence. In calculating the ending
redeemable value, all dividends and distributions by the Fund are assumed to
have been reinvested at net asset value as described in the Prospectus on the
reinvestment dates during the period. Total return, or "T" in the formula
above, is computed by finding the average annual compounded rates of return
over the 1, 5, or 10 year periods (or fractional portion thereof) that would
equate the initial amount invested to the ending redeemable value.
Additionally, redemption of shares is assumed to occur at the end of each
applicable time period.
The Fund's average annual total returns (calculated in accordance with the
SEC regulations described above) for the 1, 5 and 10 year periods ended
December 31, 1998 and for the period since inception (February 29, 1984), were
19.2%, 21.3%, 17.5%, and 17.8%, respectively. These results are based on
historical earnings and asset value fluctuations and are not intended to
indicate future performance.
The foregoing information should be considered in light of the Fund's
investment objective and policies, as well as the risk incurred in the Fund's
investment practices. Future results will be affected by the future composition
of the Fund's portfolio, as well as by changes in the general level of interest
rates, and general economic and other market conditions.
FINANCIAL STATEMENTS
The audited financial statement of the Fund as contained in the Annual Report
to Shareholders for the year ended December 31, 1998 (the "Report") are
incorporated herein by reference to the Report which has been filed with the
Securities and Exchange Commission. Any person not receiving a copy of the
Report with this Statement should call or write the Fund to obtain a free copy.
===============================================================================
CLIPPER FUND(TM)
9601 Wilshire Boulevard
Beverly Hills, California 90210
Telephone (800) 776-5033 CLIPPER FUND(TM)
Shareholder Services
& Audio Response (800) 432-2504
Internet: www.clipperfund.com
INVESTMENT ADVISER
Pacific Financial Research
[CLIPPER FUND(TM) LOGO APPEARS HERE]
DIRECTORS
James H. Gipson
Norman B. Williamson
Professor Lawrence P. McNamee
F. Otis Booth, Jr.
TRANSFER & DIVIDEND PAYING AGENT
National Financial Data Services
Post Office Box 419152
Kansas City, Missouri 64141-6152
(800) 432-2504
STATEMENT OF
CUSTODIAN ADDITIONAL INFORMATION
State Street Bank and Trust Company
April 30, 1999
COUNSEL
Paul Hasting, Janofsky & Walker LLP
INDEPENDENT AUDITORS
Ernst & Young LLP
Investment Company File No. 811-3931
===============================================================================
PART C. OTHER INFORMATION
Item 22. FINANCIAL STATEMENTS
(a) Financial Statements:
Statement of Assets and Liabilities as of December 31, 1998;
Investment Portfolio as of December 31, 1998; Statement of
Operations for the year ended December 31, 1998; Statement of
Changes in Net Assets for the two year period ended December 31,
1998; the Financial Highlights for each of the five years then
ended; and related notes, are incorporated by reference to the
Annual Report to Shareholders for the fiscal year ended December
31, 1998 for the Fund, filed separately.
Filing Date: February 24, 1999
Item 23. EXHIBITS
(a) Articles of Incorporation of the Fund, as amended.
Filing: Registration Statement
File No.: 811-3931
Filing Date: April 30, 1999
(b) By-Laws of the Fund.
Filing: Registration Statement
File No.: 811-3931
Filing Date: April 30, 1999
(c) Not applicable
(d) Investment Advisory Contract between Fund and
Pacific Financial Research.*
Filing: Registration Statement
File No.: 811-3931
Filing Date: April 30, 1999
(e) Not applicable
(f) Not applicable
(g) Custodian Agreements
Transfer Agency and Service Agreement between Clipper Fund(TM)
and State Street Bank and Trust Company, with amendments
thereto.
Filing: Registration Statement
File No.: 811-3931
Filing Date: April 30, 1999
(h) Not applicable
(i) Opinion and Consent of Counsel.
Filing: Registration Statement
File No.: 811-3931
Filing Date: April 30, 1999
(j) Consent of Independent Auditors.*
(k) Not applicable
(l) Not applicable
(m) Not applicable
(n) Financial Data Schedule*
(o) Not applicable
- ---------------
*Filed Herewith
Item 24. Persons controlled by or under common control with registrant.
None.
Item 25. Indemnification
Reference is made to Article VI of the Registrant's By-Laws
(filed previously with the Securities and Exchange Commission)
and Section 317 of the California General Corporation Law.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its By-Laws in a manner
consistent with Release No. 11330 and Release No. 7221 of the
Securities and Exchange Commission under the Investment Company
Act of 1940 so long as the interpretation of Section 17(h) and
17(i) of such act remain in effect.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the
Registrant in the successful defense of an action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Adviser.
See "Investment Advisory and Other Services" in the Prospectus
and "Investment Advisory and Other Services" in the Statement
of Additional Information.
The officers of the Investment Adviser are Mr. Gipson and Mr.
Sandler. Their businesses and other connections are listed under
the caption "Management" in the Prospectus constituting Part A
of this Registration Statement.
Item 27. Principal Underwriters
Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
thereunder are maintained at the offices of Clipper Fund(TM),
9601 Wilshire Boulevard, Beverly Hills, California 90210.
Item 29. Management Services
Other than as set forth under the caption "Investment Advisory
and Other Services" in the Prospectus, on the back cover of
the Prospectus, and under the caption "Investment Advisory and
Other Services" in the Statement of Additional Information,
registrant is not a party to any management-related service
contracts.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Fund's latest annual
report to shareholders upon request and without charge.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on it behalf by the undersigned, thereto
duly authorized, in the City of Beverly Hills, State of California, on the 30th
Day of April, 1999. The registrant certifies that it meets all of the
requirements for effectiveness of the Amendment pursuant to Rule 485(b) under
the Securities Act of 1933.
CLIPPER FUND, INC.
James H. Gipson
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------- ------------------------------ -----------------
/s/ Chairman of the Board April 30, 1999
James H. Gipson President and Director
(Principal Executive Officer)
/s/ Vice President April 30, 1999
Michael C. Sandler
/s/ Secretary, Treasurer April 30, 1999
Michael Kromm (Principal Accounting Officer)
/s/ Director April 30, 1999
F. Otis Booth
/s/ Director April 30, 1999
Norman B. Williamson
/s/ Director April 30, 1999
Lawrence P. McNamee
Exhibit List to the
Registration Statement
of Clipper Fund(TM)
Form N-1A--April 30, 1999
Exhibit No. Description
a Articles of Incorporation of the Fund
b By-Laws of the Fund
d Form of New Advisory Agreement
g Custodian Agreements
i Opinion and Consent of Counsel
j Consent of Independent Auditors
n Financial Data Schedule
ARTICLES OF INCORPORATION OF CLIPPER FUND, INC.
ONE: The name of this corporation is Clipper Fund.
TWO: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may organize under the General Corporation
Law of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
THREE: The name of this corporation's initial agent for services of process
in this State is: C T Corporation System
FOUR: This corporation is authorized to issue one class of shares of stock;
the total number of said shares is 200,000,000.
Dated: December 1, 1983
H. Deane Wong
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/
H. Deane Wong
By-Laws of Clipper Fund, Inc.
ARTICLE I
OFFICERS
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix the
location of the principal executive office of the corporation at
any place within or outside the State of California. If the
principal executive office is located outside this state, and the
corporation has one or more business offices in this state, the
Board of Directors shall fix and designate a principal business
office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any time
establish branch or subordinate offices at any place or places
where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be
held at any place within or outside the State of California
designated by the Board of Directors. In the absence on any such
designation, shareholders meetings shall be held at the principal
executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of shareholders
shall be held each year on a date and at a time designated by the
Board of Directors. At each annual meeting directors shall be
elected, and any other proper business may be transacted.
Section 3. SPECIAL MEETING. A special meeting of the
shareholders may be called at any time by the Board of Directors,
or by the Chairman of the Board, or by the President, or by one or
more shareholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at that meeting.
If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing,
specifying the time of such meeting and the general nature of the
business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board, the
President, any Vice President, or the Secretary of the
Corporation. The officer receiving the request shall cause notice
to be promptly given to the shareholders entitled to vote, in
accordance with the provisions of Sections 4 and 5 of this Article
II, that a meeting will be held at the time requested by the
person or persons calling the meeting, not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after
receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph
of this Section 3 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action
of the Board of Directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notice of
meetings of shareholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten
(10) nor more than sixty (60) days before the date of the meeting.
The notice shall specify the place, date and hour of the meeting
and (i) in the case of a special meeting, the general nature of
the business to be transacted, or (ii) in the case of the annual
meeting, those matters which the Board of Directors, at the time
of giving the notice, intends to present for action by the
shareholders. The notice of any meeting at which directors are
to be elected shall include the name of any nominee or nominees
whom, at the time of the notice, management intends to present for
election.
If action is proposed to be taken at any meeting for approval of
(i) a contract or transaction in which a director has a direct or
indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (ii) an amendment of the articles
of incorporation, pursuant to Section 902 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of the Code, or (v) a distribution in
dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of the
Code, the notice shall also state the general nature of that
proposal.
Section 5. MANNER OF GIVING SUCH NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of shareholders shall be given either
personally or by first-class mail or telegraphic or other written
communication, charges prepaid, addressed to the shareholder at
the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the
purpose of notice. If no such address appears on the
corporations' books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail or
telegraphic or other written communication to the corporation's
principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office
is located. Notice shall be deemed to have been given at the time
when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned
to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to
deliver the notice to the Shareholder at that address, all future
notices or reports shall be deemed to have been duly given without
further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive
office of the corporation for a period of one year from the date
of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of
any shareholders' meeting shall be executed by the secretary,
assistant secretary, or any transfer agent of the corporation
giving the notice, and shall be filed an maintained in the minute
book of the Corporation.
Section 6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any
meeting of shareholders shall constitute a quorum for the
transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue
to do business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting,
annual or special, whether or not a quorum is present, may be
adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy,
but in the absence of a quorum, no other business may be
transacted at that meeting, except as provided in Section 6 of
this Article II. When any meeting of shareholders, either annual
or special, is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place are announced at a
meeting at which the adjournment is taken, unless a new record
date for the adjourned meeting is fixed, or unless the adjournment
is for more than forty-five (45) days from the date set for the
original meeting, in which cased the Board of Directors shall set
a new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 4
and 5 of this Article II. At any adjourned meeting the
corporation may transact any business which might have been
transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the
provisions of Section 11 of this Article II, subject to the
provisions of Sections 702 to 704, inclusive, of the Corporations
Code of California (relating to voting shares held by a fiduciary,
in the name of a corporation, or in joint ownership). The
shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. On any
matter other than elections of directors, any shareholders may
vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or vote them against the proposal,
but, if the shareholder fails to specify the number of shares
which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is
with respect to all shares that the shareholder is entitled to
vote. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to
vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number
or voting by classes is required by California General Corporation
law or by the Articles of Incorporation. At a shareholders' meeting
at which directors are to be elected, no shareholder shall be entitled
to cumulate votes (i.e. cast for any one or more candidates a number of
votes greater than the number of the shareholder's shares) unless the
candidates' names have been placed in nomination prior to commencement
of the voting and a shareholder has given notice prior to commencement
of the voting of the shareholder's intention to cumulate votes. If any
shareholder has given such a notice, then every shareholder
entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which
that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the
candidates, as the shareholder thinks fit. The candidates
receiving the highest number of votes, up to the number of directors
to be elected, shall be elected.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be
as valid as though had at a meeting duly held after regular call
and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each person entitled
to vote, who was not present in person or by proxy, signs a
written waiver of notice or a consent to a holding of the meeting,
or an approval of the minutes. The waiver of notice or consent
need not specify either the business to be transacted or the
purpose of any annual or special meeting of shareholders, except
that if action is taken or proposed to be taken for approval of
any of those matters specified in the second paragraph of Section
4 of this Article II, the waiver of notice or consent shall state
the general nature of the proposal. All such waivers, consent or
approvals shall be filed with the corporation records or made a
part of the minutes of the meeting. Attendance by a person at a
meeting shall also constitute a waiver of notice of that meeting,
except when the person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration
of matters not included in the notice of the meeting if that objection
is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSETN WITHOUT A MEETING.
Any action which may be taken at any annual or special
meeting of shareholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote on that action were present and voted. In the
case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled
to vote for the election of directors; provided, however, that a
director may be elected at any time to fill a vacancy on the Board
of Directors that has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding
shares entitled to vote for the election of directors. All such
consents shall be filed with the Secretary of the Corporation and
shall be maintained in the corporate records. Any shareholder
giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares of a personal representative of the
shareholder or their respective proxy holders, may revoke the
consent by a writing receive by the secretary of the corporation
before written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing, and if the unanimous written consent of
all such shareholders shall not have been received, the Secretary
shall give prompt notice of the corporate action approved by the
shareholders without a meeting. This notice shall be given in the
manner specified in Section 5 of this Article II. In the case of
approval of (i) contracts or transactions in which a director has
a direct or indirect financial interest, pursuant to Section 310
of the Corporations Code of California, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of that Code,
(iii) a reorganization of the corporation, pursuant to Section
1201 of that Code, or (iv) a distribution in dissolution other
that in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall be
given at least ten (10) days before the consummation of any action
authorized by that approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS.
For purposes of determining the shareholders entitled
to notice of any meeting or to vote or entitled to give consent to
corporate action without a meeting, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty
(60) days nor less than ten (10) days before the date of any such
meeting nor more than sixty (60) days before any such action
without a meeting, and in this event only shareholders of record
on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date,
except as otherwise provided in the California General Corporation
Law. If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on
which notice is given or, if notice is waived, at the close of
business on the business day next preceding the day on which the
meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when
no prior action by the board has been taken, shall be the day on
which the first written consent is given, or (ii) when prior
action of the board has been taken, shall be at the close of
business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the
date of such other actions, whichever is later.
Section 12. PROXIES. Every person entitled to vote for directors
or on any other matter shall have the right to do so both in
person or by one or more agents authorized by a written proxy
signed by the person and filed with the Secretary of the
Corporation. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, or otherwise) by the
shareholder or the shareholder's attorney in fact. A validly
executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person
executing it, before the vote pursuant to that proxy, by a writing
delivered to the corporation stating that the proxy is revoked, or
by a subsequent proxy executed by, or attendance at the meeting
and voting in person by, the person executing the proxy; or (ii)
written notice of the death or incapacity of the make of that
proxy is received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be
valid after the expiration of eleven (11) months from the date of
the proxy, unless otherwise provided in the proxy. The
revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provision s of Sections
705(e) and 705(f) of the Corporation Code of California.
Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons other than nominees for
office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are so appointed the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one or more shareholders or proxies, the
holders of a majority of shares or their proxies, the holders of a
majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed.
If any person appointed as inspector fails to appear or fails or refuses
to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill
that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect
of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the California
General Corporation Law and any limitations in the Articles of
Incorporation and these by-laws relating to action required to be
approved by the shareholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of
the Board of Directors.
Section 2. NUMBER OF DIRECTORS. The authorized number of
directors is stated in the Articles of Incorporation and may be
changed only by an amendment of the Article of Incorporation.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected at each annual meeting of the shareholders to
hold office until the next annual meeting. Each director,
including a director elected to fill a vacancy, shall hold office
until the expiration of the term for which elected and until a
successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the Board of Directors may be
filled by a majority of the remaining directors, though less than
a quorum, or by a sole remaining director, except that a vacancy
created by the removal of a director by the vote or written
consent of the shareholders or by court order may be filled only
by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present,
or by the written consent of holders of a majority of the
outstanding shares entitled to vote. Each director so elected
shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed
to exist in the event of the death, resignation, or removal of any
director, or if the Board of Directors by resolution declares
vacant the office of a director who has been declared of unsound
mind by an order of court or convicted of a felony, or if the
authorized number of directors is increased or if the shareholders
fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be
voted for at that meeting. The shareholders may elect a director
or directors at any time to fill any vacancy or vacancies not
filled by the directors, but any such election by written consent
shall require the consent of a majority of the outstanding shares
entitled to vote.
Any director other than a director who is an "interested person"
as defined in the Investment Company Act of 1940 may resign
effective on giving written notice to the Chairman of the Board,
the President, the Secretary, or the Board of Directors, unless
the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a
future time, the Board of Directors may elect a successor to take
office when the resignation becomes effective.
A director who is an "interested person" as defined in the
Investment Company Act of 1940 by virtue of an affiliation with
the Investment Adviser of the corporation shall resign as a
director of the corporation upon the termination of his employment
relationship with the Investment Adviser. The Board of Directors
may, at its option, decline to accept the resignation of a
director who tenders his resignation under these circumstances.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of
offices expires.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the Board of Directors may be held at any
place within or outside of State of California that has been
designated from time to time by resolution of the board. In the
absence of such a designation, regular meetings shall be held at
the principal executive office of the Corporation. Special
meetings of the board shall be held at any place within or outside
of the State of California that has been designated in the notice
of the meeting or, if not stated in the notice or there is no
notice, at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
Section 6. ANNUAL MEETING. Immediately following each annual
meeting of shareholders, the Board of Directors shall hold a
regular meeting for the purpose of organization, any desired
election of officers, and the transaction of other business.
Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the
Board of Directors shall be held without call at such time as
shall from time to time be fixed by the Board of Directors. Such
regular meetings may be held without notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by
the Chairman of the Board or the President or any Vice President
or the Secretary or any two Directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail or telegram, charges prepaid, addressed to each
director at the director's address as it is shown on the records
of the corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before
the time of the holding of the meeting. In case the notice is
delivered personally or by telephone or telegram, it shall be
delivered personally or by telephone or to the telegraph company
at least forty-eight (48) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place
if the meeting is to be held at the principal executive office of
the corporation.
Section 9. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of
business, except to adjourn as proved in Section 11 this Article
III. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors,
subject to the provisions of Section 310 of the Corporations Code
of California (as to approval of contracts or transactions in
which a director has a direct or indirect material financial
interest), Section 311 of that Code (as to appointment of
committees), and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is
initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken
is approved by at least a majority of the required quorum for that
meeting.
Section 10. CERTAIN INVESTMENT DECISIONS. In any case where an
officer or director of the corporation or of any investment
adviser of the corporation, or a member of any committee of the
corporation, is also an officer or director of another corporation
and the purchase or sale of the securities issued by such other
corporation is under consideration, the officer, director or
committee member concerned will abstain from participating in any
decision made on behalf of the corporation to purchase or sell any
securities issue by such other corporation .
Section 11. WAIVER OF NOTICE. The transactions of any meeting of
the Board of Directors, however called and noticed or wherever
held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum is present and if, either
before or after the meeting, each of the directors not present
signs a written waiver of notice, a consent to holding the meeting
or an approval of the minutes. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the corporate records
or made a past of the minutes of the meeting. Notice of a meeting
shall also be deemed given to any director who attends the meeting
without protesting, before or at its commencement, the lack of
notice to that director.
Section 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to
another time and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given unless the
meeting is adjourned for more than twenty-four (24) hours, in
which case notice of the time and place shall be given before the
time of the adjourned meeting, in the manner specified in Section
8 of this Article III, to the directors who were not present at
the time of the adjournment.
Section 14. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Board of Directors may be taken
without a meeting, if all members of the board shall individually
or collectively consent shall have the same force and effect as a
unanimous vote of the Board of Directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the
board.
Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees other than directors who are officers,
directors or employees of the Investment Advisers of the
corporation may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or
determined by resolution of the Board of Directors. This Section
14 shall not be construed to preclude any director from serving
the corporation in any other capacity as an officer, agent,
employee, or otherwise, and receiving compensation for those
services.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may,
by resolution adopted by a majority of the authorized number of
directors, designate one or more committees, each consisting of
two or more directors, to serve at the pleasure of the Board.
The Board may designate one or more directors as alternate members
of any committee, who may replace any absent member at any meeting
of the committee. Any committee, to the extent provided in the
resolution of the Board, shall have all the authority of the
Board, except with respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders'
approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the Board or on any committee;
(d) the amendment or repeal of by-laws or the adoption of new by-
laws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(g) the appointment of any other committees of the Board of
Directors or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in
accordance with, the provisions of Article III of these by-laws,
Sections 5 (place of meetings), 7 (regular meetings), 8 (special
meetings and notice), 9 (quorum), 10 (waiver of notice), 11
(adjournment), 12 (notice of adjournment), and 13 (action without
meeting), with such changes in the context of those by-laws as are
necessary to substitute the committee and its members for the
Board of Directors and its members, except that the time of
regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the
committees; special meetings of committees may also be called by
resolution of the Board of Directors; and notice of special
meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions
of these by-laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
President, a Secretary, and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board, one or more Vice Presidents,
one or more assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V.
Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation,
except such officers as may be appointed in accordance with the
provision of Section 3 or Section 5 of this Article V, shall be
chosen by the Board of Directors, and each shall serve at the
pleasure of the Board, subject to all rights, if any, of an
officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint, and may empower the President to appoint, such other
officers as the business of the corporation may require, each of
whom shall hold office for such period, have such authority and
perform such duties as are provided in the by-laws or as the Board
of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment,
any officer may be removed, either with or without cause, by the
Board of Directors, at any regular or special meeting of the
Board, or except in case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the
acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in these by-laws
for regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at meetings
of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him the
Board of Directors or prescribed by the by-laws. If there is no
President, the Chairman of the Board shall in addition be the
Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if any,
as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the President shall be the
Chief Executive Officer for the corporation and shall, subject to
the control of the Board of Directors, have general supervision,
direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders
and, in the absence of the Chairman of the Board, or if there be
none, at all meetings of the Board of Directors. He shall have
the general powers and duties of management usually vested in the
office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors
or the by-laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as
fixed by the Board of Directors or, if not ranked, a Vice
President designated by the Board of Directors, all the duties of
the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President. The
Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them
respectively by the Board of Directors or the by-laws, and the
President, or the Chairman of the Board.
Section 9. SECRETARY. The secretary shall keep or cause to be
kept, at the principal executive office or such other place as the
Board of Directors may direct, a book of minutes of all meetings
and actions of directors, committees of directors, and
shareholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice given, the
names of those present at directors' meetings or committee
meetings, the number of shares present or represented at
shareholders' meetings and the proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer
agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register,
showing the names of all shareholders and their addresses, the
number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the Board of Directors
required by the by-laws or by law to be given, and he shall keep
the seal of the corporation if one be adopted, in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the by-laws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have custody of the corporate funds and securities and shall
keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings, and shares. The books of account
shall at all reasonable times be open to inspection by any
director. The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with
such depositaries as may be designated by the Board of Directors.
He shall disburse the funds of the corporation as may be ordered
by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his
transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the Board of
Directors or the by-laws.
ARTICLE VI
INDEMNIFICATIOIN OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes
of this Article, "agent" means any person who is or was a
director, officer, employee, or other agent of this corporation,
or is or was serving at the request of this corporation as a
director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee, or agent of a
foreign or domestic corporation which was a predecessor
corporation; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal,
administrative, or investigative, and "expenses" includes, without
limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 (c) of this
Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This corporation
shall indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding (other than an action by or
in the right of this corporation) by reason of the fact that such
person is or was an agent of this corporation, against expenses,
judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding if that
person acted in good faith and in a manner that person reasonably
believed to be in the best interests of this corporation and, in
the case of a criminal proceeding, had no reasonable cause to
believe the conduct of that person was unlawful. The termination
of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be
in the best interest of this corporation or that the person had
reasonable cause to believe the person's conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION . This corporation shall
indemnify any person who was or is a party, or is threatened to be
made a party pending or completed action by or in the right of
this corporation to procure a judgment in its favor by reason of
the fact that that person is or was an agent of this corporation,
against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if
that person acted in good faith, in a manner that person believed
to be in the best interests of this corporation and with such
care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
No indemnification shall be made under this Section 3.
(a) In respect of any claim, issue of matter as to which that
person shall have been adjudged to be liable to this corporation
in the performance of that person's duty to this corporation,
unless and only to extent that the court in which that action was
brought shall determine upon application that, in view of all the
circumstances of that case, that person is fairly and reasonably
entitle to indemnity of the expenses which the court shall
determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this corporation has been successful on the merits in
defense of any proceeding referred to in Sections 2 or 3 of this
Article, or in defense of any claim, issue, or matter therein, the
agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article, shall be
made by this corporation only if authorized in the specific case
on a determination that indemnification of the agent is proper in
the circumstances because the agent has met the applicable
standard of conduct set forth in Sections 2 or 3 of this Article,
by:
(a) A majority vote of a quorum consisting of directors who are
not parties to the proceeding;
(b) Approval by the affirmative vote of a majority of the shares
of this corporation entitled to vote represented at a duly held
meeting at which a quorum is present or by the written consent of
holders of a majority of the outstanding shares entitled to vote.
For this purpose, the shares owned by the person to be indemnified
shall not be considered outstanding or entitled to vote thereon;
or
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney
or other person rendering services in connection with the defense,
whether or not such application by the agent, attorney, or other
person is opposed by this corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this corporation before the
final disposition of the proceeding on receipt of an undertaking
by or on behalf of the agent to repay the amount of the advance
unless it shall be determined ultimately that the agent is entitle
to be indemnified as authorized in this Article.
Section 7. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons
other than directors and officers of this corporation or any
subsidiary hereof may be entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Section 4 or
Section 5 (c), in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
articles, a resolution of the shareholders, or an agreement in
effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the Board of Directors of this corporation to purchase such
insurance, this corporation shall purchase and maintain insurance
on behalf of any agent of the corporation against any liability
asserted against or incurred by the agent in such capacity or
arising out of the agents' status as such whether or not this
corporation would have the power to indemnify the agent against
that liability under the provisions of this section.
Section 10. FIDUCIARIES OR CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan
in that person's capacity as such, even though that person may
also be an agent of the corporation defined in Section 1 of this
Article. Nothing contained in this Article shall limit any right
to indemnification to which such a trustee, investment manager, or
other fiduciary may be entitled by contract or otherwise, which
shall be enforceable to the extent permitted by applicable law
other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTAINANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office, or that
the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the Board of
Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares
held by each shareholder.
A shareholder or shareholders of the corporation holding at least
five percent (5%) in the aggregate of the outstanding voting
shares of the corporation may (i) inspect and copy the records of
shareholders ` names and addresses and shareholdings during usual
business hours on five (5) days prior written demand on the
corporation, and (ii) obtain from the transfer agent of the
corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the shareholders`
names and addresses, who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record
date for which that list has been compiled or as of a date
specified by the shareholder after the date of demand. This list
shall be made available to any such shareholder by transfer agent
on or before the later of five (5) days after the demand is
received or the date specified in the demand as the date as of
which the list is to be compiled. The record of shareholders
shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to
the holder's interests as a shareholder or as the holder of a
voting trust certificate. Any inspection and copying under this
Section 1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the
demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation
shall keep at its principal executive office, or if its principal
executive office is not in the State of California, at its
principal business office in this state, the original or a copy of
the by-laws as amended to date, which shall be open to inspection
by the shareholders at all reasonable times during office hours.
If the principal executive office of the corporation is outside
the State of California and the corporation has no principal
business office in this state, the Secretary shall, upon the
written request of any shareholder, furnish to that shareholder a
copy of the by-laws as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or
committees of the Board of Directors shall be kept at such place
or places designated by the Board of Directors, or, in the absence
of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of
a voting trust certificate, at any reasonable time during usual
business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent
or attorney, and shall include the right to copy and make
extracts. These rights of inspection shall extend to the records
of each subsidiary corporation and of the corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books,
records, and documents of every kind and the physical properties
of the corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or
attorney and the right of inspection includes the right to copy
and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of Directors
shall cause an annual report to be sent to the shareholders not
later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. This report shall be sent
at least fifteen (15) days before the annual meeting of
shareholders to be held during the next fiscal year and in the
manner specified in Section 5 of Article II of these by-laws for
giving notice to shareholders of the corporation. The annual
report shall contain a balance sheet as of the end of the fiscal
year and an income statement and statement of changes in financial
position for the fiscal year, accompanied by any report of
independent accountants or, if there is not such report, the
certificate of an authorized officer of the corporation that the
statements were prepared without audit from the books and records
of the corporation.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each
quarterly period of each fiscal year, and any accompanying balance
sheet of the corporation as of the end of each such period, that
has been prepared by the corporation shall be kept on file in the
principal executive office of the corporation for twelve (12)
months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of
any such statement or a copy shall be mailed to any such
shareholder.
If a shareholder or shareholders holding at least five percent (5
%) of the outstanding shares of any shares of any class of stock
of the corporation makes a written request to the corporation for
an income statement of the corporation for the three month, six
month or nine month period of the then current fiscal year ended
more than thirty (30) days before the date of the request, and a
balance sheet of the corporation as of the end of that period, the
Chief Financial Officer shall cause that statement to be prepared,
if not already prepared, and shall deliver personally or mail that
statement or statements to the person making the request within
thirty (30) days after the receipt of the request. If the
corporation has not sent to the shareholders its annual report
for the last fiscal year, this report shall likewise be delivered
or mailed to the shareholder or shareholders within (30) days after
the request. The corporation shall also, on the written request of any
shareholder, mail to the shareholder a copy of the last annual,
semi-annul, or quarterly income statement, which it has prepared,
and a balance sheet as of the end of that period.
The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any
independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that the
financial statements were prepared without audit from the books
and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall, during the period commencing on December 1 and
ending on November 30 of each year, file with the Secretary of
State of the State of California, on the prescribed form, a
statement setting forth the names and complete business or
residence addresses of all incumbent directors, the number
vacancies on the board, if any, the names and complete business or
residence addresses of the Chief Executive Officer, Secretary, and
Chief Financial Officer, the street address of its principal
executive office or principal business office in this state, and
general type of business constituting the principal business
activity of the corporation, together with a designation of the
agent of the corporation for the purpose of service of process,
all in compliance with Section 1502 of the Corporations Code of
California.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other
lawful action (other than action by shareholders by written
consent without a meeting), the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60)
days before any such actions, and in that case only shareholders
of record on the date so fixed are entitled to receive the
dividend, distribution, or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any
share on the books of the corporation after the record date so
fixed, except as otherwise provided in the California General
Corporation Law.
If the Board of Directors does not so fix a record date, the
record date for determining shareholders for any such purpose
shall be at the close of business on the date on which the Board
adopts the application resolution or the sixtieth (60th) day
before the state of that action, whichever is later.
Section 2. CHECKS, DRAFT, EVIDENCES OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes, or other
evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or person
and in such manner as from time to time, shall be determined by
resolution of Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED. The
Board of Directors, except as otherwise provided in these by-laws,
may authorize any officer or officers, agent or agents, to enter
into any contract or execute any instrument in the name of and on
behalf of the corporation, and this authority may be general or
confined to specific instances; and, unless so authorized or
ratified by the Board of Directors or within the agency power of
an officer, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for
any amount.
Section 4. CERTIFICATES FOR SHARES. Each holder of shares of the
capital stock of the corporation shall be entitled to have a
certificate issue when any of these shares are fully paid, and the
Board of Directors may authorize the issuance of certificates
and/or shares as partly paid provided that these certificates
shall state the amount of the consideration to be paid for them
and the amount paid. All certificates shall be signed in the name
of the corporation by the Chairman of the Board or Vice Chairman
of the Board or the President or Vice President and by the Chief
Financial Officer or an assistant Treasurer or the Secretary or
any assistant Secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on a certificate shall have
ceased to be that officer, transfer agent, or registrar before
that certificate is issued, it may be issued by the corporation
with the same effect as if that person were an officer, transfer
agent, or registrar at the date of issue.
Section 5 TRANSFER OF SHARES. The shares of any class of stock of
the corporation shall be transferable on the books of the
corporation by the holder thereof in person or by a duly
authorized attorney, upon surrender for cancellation of a
certificate or certificates for a like number of shares, with a
duly executed assignment and power of transfer endorsed thereon or
attached thereto, or if no certificate has been issued to the
holder in respect of shares of stock of the corporation, upon
receipt of written instructions, signed by such holder, to
transfer such shares from the account maintained in the name of
such holder by the corporation or its agent. Such proof of the
authenticity of the signatures as the corporation or its agent may
reasonably require shall be provided.
Section 6. LOST CERTIFICATES. Except as provided in this Section
5, no new certificates for shares shall be issued to replace an
old certificate unless the latter is surrendered to the
corporation and cancelled at the same time. The Board of
Directors may, in case any share certificate or certificate for
any other security is lost, stolen, or destroyed, authorize the
issuance of a replacement certificate on such terms and conditions
as the Board may require, including provision for indemnification
of the corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may
be made against it, including any expense or liability, on account
of the alleged loss, theft, or destruction of the certificate or
the issuance of the replacement certificate.
Section 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
Chairman of the Board, the President, or any Vice President, or
any other person authorized by resolution of the Board of
Directors or by any of the foregoing designated officers, is
authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to
these officers to vote or represent on behalf of the corporation
any and all shares held by the corporation in any other
corporation or corporations may be exercised by any of these
officers in person or by any person authorized to do so by a proxy
duly executed by these officers.
Section 8. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction
and definitions in the California General Corporation Law shall
govern the construction of these by-laws. Without limiting the
generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New by-laws may be adopted
or these by-laws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of
authorized directors of the corporation, the authorized number of
directors may be changed only by an amendment of the Articles of
Incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided by in Section 1 of this Article IX, by-
laws, other than a by-law or an amendment of a by-law changing the
authorized number of directors, may be adopted, amended, or
repealed by the Board of Directors.
THIS IS TO CERTIFY,
That I am the duly elected, qualified, and acting Secretary of
Clipper Fund, Inc., and that the above and foregoing by-laws were
adopted as the by-laws of said corporation on the 16th day of
December, 1983, by Susan M. McLane.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of
December, 1983.
ATTEST:/s/
Susan M. McLane
Secretary
INVESTMENT ADVISORY CONTRACT
INVESTMENT ADVISORY CONTRACT, made as of this 31st day of March,
1999 between the CLIPPER FUND, INC, a California corporation
(hereinafter called the "Fund"), and PACIFIC
FINANCIAL RESEARCH, INC. (hereinafter called the "Investment
Adviser"), a Massachusetts Corporation, a wholly owned subsidiary
of United Asset Management Corporation.
WHEREAS, the Fund is organized as an open-end, non-
diversified management company, registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), for the purpose
of investing its assets in securities, and
WHEREAS, the Fund desires to retain the Investment Adviser
to render various investment advisory, operational, statistical,
accounting and clerical services to the Fund, and the Investment
Adviser is willing to render such services.
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto, intending to be legally
bound, mutually covenant and agree as follows:
1. Appointment of Investment Adviser. Effective immediately,
the Fund hereby appoints the Investment Adviser to act as
investment adviser to the Fund for the period and on the
terms set forth herein. The Investment Adviser accepts
such appointment and agrees to render the services set forth
herein, for the compensation provided herein.
2. Duties of the Fund. The Fund shall at all times keep
the Investment Adviser fully informed of the securities
owned, the funds available and to become available for
investment, and generally as to the condition of its affairs.
The Fund shall furnish the Investment Adviser with a signed copy
of each report prepared by the Fund's independent public accountants
and with such other documents and information as the Investment
Adviser may from time to time reasonably request.
3. Duties of Investment Adviser. Subject to the supervision
of the Board of Directors of the Fund, the Investment
Adviser shall manage the investment operations of the Fund and
the composition of its portfolio, including the purchase,
retention and disposition of securities, in accordance with the
Fund's investment objectives and policies as stated in the Fund's
Prospectus and Statement of Additional Information (as
amended or supplemented from time to time) and subject to the
following understandings:
(a) The Investment Adviser shall provide supervision of
the Fund's investments, furnish a continuous investment
program for the Fund, determine from time to time what
securities will be purchased, retained or sold by the Fund and
what portion of the assets will be invested or held uninvested
as cash.
(b) The Investment Adviser shall use the same skill and
care in the management of the portfolio of the Fund
as it uses in the administration of other portfolios for which
it has investment responsibility.
(c) The Investment Adviser, in the performance of its
duties and obligations under this Contract, shall act
in conformity with the Fund's Articles of Incorporation,
By-Laws, Prospectus and Statement of Additional Information
and shall conform to and comply with the requirements of the
1940 Act and all other applicable Federal and state laws and
regulations.
(d) The Investment Adviser, its officers and employees
shall not make loans for the purpose of purchasing or
carrying shares of capital stock of the Fund or make loans to
the Fund.
(e) The Investment Adviser shall place orders for the purchase or
sale of securities either directly with the issuer or
with any broker or dealer who specializes in the securities
owned by the Fund. In providing the Fund with investment
supervision, it is recognized that the Investment Adviser will
give primary consideration to securing the most favorable price
and efficient execution. Within the framework of this policy,
the Investment Adviser may consider the financial responsibility,
research and investment information and other services provided
by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the
Investment Adviser may be a party. It is understood that it is
desirable for the Fund that the Investment Adviser have access to
supplemental investment and market research and security and
economic analysis provided by brokers, and that the allocation of
Fund brokerage to such brokers in exchange for access to such
research and analysis may result in higher brokerage costs to the
Fund than would be the case if brokerage were allocated
exclusively on the basis of seeking the most favorable price and
efficient execution. Therefore, the Investment Adviser is
authorized to pay higher brokerage commissions for the purchase
and sale of securities for the Fund to brokers who provide such
research and analysis, subject to review by the Fund's Board of
Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Investment Adviser
in connection with its services to other clients.
On occasions when the Investment Adviser deems the purchase
or sale of a security to be in the best interest of the Fund as
well as other clients, the Investment Adviser, to the extent
permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Investment Adviser in the manner
it considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(f) The Investment Adviser shall provide all statistical,
economic and financial information reasonably
required by the Fund and reasonably available to the
Investment Adviser; and shall provide persons satisfactory to
the Fund's Board of Directors to act as officers and employees
of the Fund. Such officers and employees, as well as certain
directors of the Fund, may be directors, officers or employees
of the Investment Adviser.
(g) The Investment Adviser shall maintain all books and
records required by paragraph (b) (5), (6), (7), (9),
(10) and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act with respect to the Fund's securities transactions and
shall render to the Fund's Board of Directors such periodic and
special reports as the Board may reasonably request.
(h) The Investment Adviser shall provide the Custodian of
the Fund's securities on each business day with a
list of trades for that day.
(i) The Investment Adviser may act as an investment
adviser to other persons, firms or corporations (including
investment companies), and has numerous Advisory clients besides
the Fund.
4. Expenses.
(a) The Investment Adviser is responsible for the
following expenses incurred by the Fund: (i) the
compensation of any of the Fund's directors, officers and
employees who are interested persons of the Investment Adviser
or its affiliates (other than by reason of being directors,
officers or employees of the Fund), and (ii) expenses of printing
and distributing the Fund's Prospectus, Statement of Additional
Information and periodic financial reports to persons other than
current shareholders of the Fund, and sales and advertising
materials.
(b) The Fund is responsible and has assumed the
obligation for payment of all of its other expenses including
(i) brokerage and commission expenses, (ii) Federal, state or
local taxes, including issue and transfer taxes, incurred by or
levied on the Fund, (iii) interest charges on borrowings, (iv)
compensation of any of the Fund's directors, officers or employees
who are not interested persons of the Investment Adviser or its
affiliates (other than by reason of being directors, officers or
employees of the Fund), (v) charges and expenses of the Fund's
custodian, transfer agent and registrar, (vi) all costs
associated with shareholders meetings and the preparation and
dissemination of proxy solicitation materials, except for meetings
called solely for the Investment Adviser's benefit, (vii) legal
and auditing expenses, (viii) payment of all investment Advisory
fees (including the fee payable to the Investment Adviser
under this Contract), (ix) insurance premiums on the Fund's
property and personnel, including the fidelity bond and liability
insurance for officers and directors, (x) printing and mailing
of all reports, including semi-annual and annual reports,
prospectuses and statements of additional information to existing
shareholders, (xi) fees and expenses of registering the Fund's
shares under the Federal securities laws and of qualifying its
shares under applicable state securities laws, including expenses
attendant upon renewing and increasing such registrations and
qualifications, (xii) accounting and bookkeeping costs and
expenses necessary to maintain the Fund's books and records as
required by the 1940 Act, including the pricing of the Fund's
portfolio securities and the calculation of its daily net asset
value, (xiii) organizational expenses and (xiv) any extraordinary
and non-recurring expenses, except as otherwise prescribed herein.
(c) To the extent the Investment Adviser incurs any costs
or performs any services which are an obligation of
the Fund, as set forth herein, the Fund shall promptly reimburse
the Investment Adviser for such costs and expenses. To
the extent the services for which the Fund is obligated to pay are
performed by the Investment Adviser, the Investment Adviser shall
be entitled to recover from the Fund only to the extent of the
Investment Adviser's actual costs for such services, including
the costs of personnel, office space, and other facilities
applicable to the furnishing of such services.
5. Books and Records. The Investment Adviser agrees that
all records which it maintains for the Fund are the
property of the Fund, and it will surrender promptly to the Fund any
such records upon the Fund's request. The Investment Adviser
further agrees to preserve for the periods prescribed by Rule 31a-
2 under the 1940 Act any such records as are required to be
maintained by Rule 31a-1 under the 1940 Act.
6. Investment Adviser's Fee. For the services provided by
the Investment Adviser under the Contract, the Investment
Adviser shall receive from the Fund a management fee equal to 1%
per annum of the Fund's average daily net asset values. The
management fee shall be accrued daily in computing the net
asset value of a share for the purpose of determining the
offering and redemption price per share, and shall be paid to the
Investment Adviser at the end of each month. The Investment Adviser
shall reduce the fees payable to it under this Contract to the
extent required under the most stringent expense limitation
applicable to the Fund imposed by any state in which shares of
beneficial interest of the Fund are qualified for sale. The
Investment Adviser may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this
Contract and may agree to pay expenses which are the responsibility of
the Fund under this Contract. Any such reduction or payment
shall be applicable only to such specific reduction or payment and
shall not constitute an agreement to reduce any future compensation
or reimbursement due to the Investment Adviser hereunder or
to continue future payments.
7. Limitation of Liability. The Investment Adviser shall
not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the
matter to which this Contract relates, except for liability
resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Contract. The
Fund shall indemnify the Investment Adviser from and against
liability, including, but not limited to, expenses incurred in
defending against the same, except for liability to which the
Investment Adviser is subject pursuant to the preceding sentence, to
the extent permitted by applicable law.
The obligations of the Fund are not binding upon any
of the Directors, officers or shareholders of the Fund
individually, but are binding only upon the assets and property of the
Fund, and no resort shall be had to the private property of any such
Director, officer or shareholder for the satisfaction of
any obligation or claim hereunder.
8. Duration and Termination. This Contract, unless sooner
terminated as provided herein, shall continue in effect
until March 31, 2000. This Contract shall continue in effect
thereafter for successive periods not exceeding one year, provided
that such continuance is specifically approved at least annually (i)
by the Fund's Board of Directors or by a vote of a majority of
the outstanding voting securities of the Fund (as defined in
the 1940 Act) and (ii) by a majority of the Fund's Board of
Directors who are not parties to the Contract or interested persons of
any such party, by vote cast in person at a meeting called for the
purpose of voting on such approval.
The Contract is terminable on 60 days' written notice by
vote of a majority of the Fund's outstanding shares (as defined
in the 1940 Act) or by vote of a majority of the Fund's entire
Board of Directors, or by the Investment Adviser on 60 days
written notice, and shall automatically terminate in the event of
its assignment (as defined in the 1940 Act.)
9. Amendment of Contract. This Contract constitutes the
entire agreement between the parties hereto. This Contract
may be amended only with the approval of the holders of a
majority of the outstanding shares of the Fund, as defined
in the 1940 Act.
10. Governing Law. This Contract shall be governed by and
construed in accordance with the laws of the State of
California, without reference to principles of conflicts of law;
provided, however, that nothing herein shall be construed in a
manner inconsistent with the 1940 Act, the Investment Advisers
Act of 1940, or any rule or regulation of the Securities and
Exchange Commission thereunder.
11. Miscellaneous. The captions in this Contract are
included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year above
written.
CLIPPER FUND, INC.
By:/s/ James H. Gipson
Chairman and President
ATTEST:/s/
Michael Kromm
Secretary/Treasurer
PACIFIC FINANCIAL RESEARCH
(CORPORATE SEAL) By:/s/ James H. Gipson
President
ATTEST:/s/
Bruce G. Veaco
Secretary/Chief Financial Officer
CUSTODIAN CONTRACT
This contract between Clipper Fund, Inc., a corporation
organized and existing under the laws of California, having its
principal place of business at 9601 Wilshire Blvd, Beverly Hills,
California, hereinafter called the "Fund", and State Street Bank
and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian".
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of its assets pursuant to the provisions of the Articles
of Incorporation. The Fund agrees to deliver to the
Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital
distributions received by it with respect to all
securities owned by the Fund from time to time, and the
cash consideration received by it for such new or
treasury shares of capital stock, $_No_par value,
("Shares") of the Fund as may be issued or sold from
time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the
Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.16), the Custodian shall from time to time employ one or
more sub-custodians, but only in accordance with an applicable
vote by the Board of Directors of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability
to the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the
Custodian.
1. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property,
including all securities owned by the Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System".
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of
Section 2.12 hereof;
4) To the depository agent in connection with tender
or other similar offers for portfolio securities of
the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any
such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units; provided that, in any
such case, the new securities are to be delivered
to the Custodian;
7) To the broker selling the same for examination in
accordance with the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise
of such warrants, rights or similar securities or
the surrender of interim receipts or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund; but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund, which
may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with
any loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned by
the Fund, prior to the receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) Upon receipt of instruments from the transfer agent
("Transfer Agent") for the Fund, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus, in satisfaction of requests
by holders of Shares for repurchase or redemption;
and
13) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive
Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant
Secretary, specifying the securities to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to
be proper corporate purposes, and naming the person
or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of
the Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Fund has authorized in writing
the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser
as the Fund, or in the name or nominee name of any agent appointed
pursuant to section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Fund under the terms of
this Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund,
subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Directors of
the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Payments of Shares. The Custodian shall receive from the
distributor for the Fund's Shares or from the Transfer Agent of
the Fund and deposit into the Fund's account such payments as are
received for Shares of the Fund issued or sold from time to time
by the Fund. The Custodian will provide timely notification to
the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual
agreement between the Fund and the Custodian, the Custodian
shall, upon receipt of Proper Instructions,
1) invest in such instruments as may be set forth in
such instructions on the same day as received all
federal funds after a time agreed upon between the
Custodian and the Fund; and
2) make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect to
registered securities held hereunder to which the Fund shall be
entitled by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other payments
with respect to bearer securities if, on the date of payment by
the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities
held hereunder. Income due the Fund on securities loaned pursuant
to the provisions of Section 2.2 (10) shall be the responsibility
of the Fund. The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income
to which the Fund is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out monies of the
Fund in the following cases only:
1) Upon the purchase of securities for the account of
the Funds but only (a) against the delivery of such
securities to the Custodian (or any bank, banking
firm or trust company doing business in the United
States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act
as a custodian and has been designated by the
Custodian as its agent for this purpose) registered
in the name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of
a purchase effected through a Securities System, in
accordance with the conditions set forth in Section
2.12 hereof or (c) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued
by the Fund as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited to
the following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant
to the governing documents of the Fund;
6) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such
payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities in the absence of specified
written instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian, except that in the case of purchase
agreements entered into by the Fund with a bank which is a member
of the Federal Reserve System, the Custodian may transfer funds to
the account of such bank prior to the receipt of written evidence
that the securities subject to such repurchase agreement have been
transferred by book-entry into segregated non-proprietary account
of the custodian maintained with the Federal Reserve Bank of
Boston or of the safe-keeping receipt, provided that such
securities have in fact been so transferred by book entry.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the purpose but
subject to the limitations of the Articles of Incorporation and
any applicable votes of the Board of Directors of the Fund
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any
other bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, to act as a custodian,
as its agent to carry out such of the provisions of this Article 2
as the Custodian may from time to time direct; provided, however,
that the appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian
may deposit and/or maintain securities owned by the Fund in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a
Securities System shall identify by book-entry
those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased
for the account of the Fund upon (i) receipt of
advice from the Securities System that such
securities have been transferred to the Account,
and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall
transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect
such transfer and payment for the account of the
Fund. Copies of all advice from the Securities
System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the
custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in
the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the Securities
System's accounting system, internal accounting
control and procedures for safeguarding securities
deposited in the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any other
person which the custodian may have as a consequence of any such
loss or damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of the Fund or a nominee of the Fund,
all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Fund
such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.15 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Fund shall
notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialed by one or more
person or persons as the Board of Directors shall have from time
to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by
a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided
that the Board of Directors and the Custodian are satisfied that
such procedures afford adequate safeguards for the Fund's assets.
2.17 Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar
items relating to its duties under this Contract,
provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments;
and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Directors
of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of
the Fund. The Custodian may receive and accept a certified
copy of a vote of the Board of Directors of the Fund as
conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination or
of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such
vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of the Fund shall be made at the time or times described from time
to time in the Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund
may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1, and Form N-1R or other annual
reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the
Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control
and procedures for safeguarding securities, including securities
deposited and/or maintained in a Securities System, relating to
the services provided by the Custodian under this Contract; such
reports, which shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund, to provide
reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such
inadequacies, shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to
the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in
the Custodian or its nominee assigned to the Fund being liable for
the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount
and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under
Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Directors of the Fund have approved the initial use of a
particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the
Board of Directors have reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended; provided further,
however, that the Fund shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations,
or any provision of the Articles of Incorporation, and further
provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate the Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities then
held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Directors
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to
an account of such successor custodian all of the Fund's
securities held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under
this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of vote referred to or of the Board of Directors to
appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the
duties and obligations of the custodian shall remain in full force
and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or
additional provisions shall be in writing signed by both parties
and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of
Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 24th
day of March, 1984.
ATTEST
/s/ /s/
By
Norman B. Williamson James Gipson
Treasurer and Chief Financial Officer Chairman and President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ By /s/
Ahall ED Hawkins
Assistant Secretary Vice President
Opinion and Consent of Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California St.
San Francisco, CA 94104
Telephone (415) 835-1600
Fax: (415) 217-5333
Internet: www.phjw.com
April 27, 1999
Clipper Funds, Inc.
9601 Wilshire Boulevard, Suite 800
Beverly Hills, CA 90210
Re: Clipper Fund
Ladies and Gentlemen:
We have acted as counsel to Clipper Fund, Inc., a
California corporation (the "Company"), in connection with
the Post-Effective Amendment to the Company's Registration
Statement on Form N-1A filed on March 26, 1999, with the
Securities and Exchange Commission (the "Post-Effective
Amendment"), relating to the issuance by the Company of an
indefinite number of no-par value shares of beneficial
interest (the "Shares") by a series of the Company, the
Clipper Fund (the "Fund").
In connection with this opinion, we have assumed the
authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all
signatures, the legal capacity of all natural persons, and
the conformity to the originals of all records, documents,
and instruments submitted to us as copies. We have based
our opinion on the following:
(a) the Company's Articles of Incorporation dated
December 1, 1983 (the "Articles"), (as filed with
the California Secretary of State on
December 1, 1983), as amended on February 16,
1984, February 27, 1984, March 30, 1984, and May
2, 1984, as certified to us by an officer of the
Company as being true and complete and in effect
on the date hereof;
(b) the Bylaws of the Company dated January 27, 1984,
as certified to us by an officer of the Company as
being true and complete and in effect on the date
hereof;
(c) minutes of various meetings of the Board of
Directors;
(d) the Post-Effective Amendment; and
(e) a certificate of an officer of the Company as to
certain factual matters relevant to this opinion.
Our opinion below is limited to the federal law of the
United States of America and the corporations law of the
State of California. We have based our opinion below solely
on our review of Title 1 Chapter 4 of the California
Corporations Code and the case law interpreting such Code as
reported in California Business Statutes (West Group 1999)
as updated on Westlaw through April 6, 1999. We have not
undertaken a review of other California law or of any
administrative or court decisions in connection with
rendering this opinion. We disclaim any opinion as to any
law other than that of the United States of America and the
corporations law of the State of California as described
above, and we disclaim any opinion as to any statute, rule,
regulation, ordinance, order or other promulgation of any
regional or local governmental authority.
Based on the foregoing and our examination of such
questions of law as we have deemed necessary and appropriate
for the purpose of this opinion, and assuming that (i) all
of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their
issuance in accordance with statements in the Fund's
Prospectus included in the Post-Effective Amendment, and in
accordance with the Articles of Incorporation, (ii) all
consideration for the Shares will be actually received by
the Company, and (iii) all applicable securities laws will
be complied with, it is our opinion that, when issued and
sold by the Company, the Shares will be legally issued,
fully paid and nonassessable.
This opinion is rendered to you in connection with the
Post-Effective Amendment and is solely for your benefit.
This opinion may not be relied upon by you for any other
purpose or relied upon by any other person, firm,
corporation or other entity for any purpose, without our
prior written consent. We disclaim any obligation to advise
you of any developments in areas covered by this opinion
that occur after the date of this opinion.
We hereby consent to (i) the reference to our firm as
Legal Counsel in the Prospectus and the Statement of
Additional Information included in the Post-Effective
Amendment, and (ii) the filing of this opinion as an exhibit
to the Post-Effective Amendment.
Sincerely yours,
/s/
Paul, Hastings, Janofsky & Walker LLP
Clipper Funds, Inc.
Officer's Certificate
The undersigned officer of Clipper Funds, Inc. (the
"Company"), in connection with the opinion to be rendered by
Paul, Hastings, Janofsky & Walker LLP ("PHJ&W"), in
connection with the Company's filing of Post-Effective
Amendments, with respect to the Clipper Fund (the "Fund"),
with the Securities and Exchange Commission, hereby
certifies, represents, and covenants to PHJ&W that:
1. The undersigned is an officer of the Company and
is authorized to execute this certificate on
behalf of the Company.
2. The undersigned has furnished PHJ&W with a true
and complete copy of the Company's Articles of
Incorporation dated December 1, 1983 (the
"Articles"), (as filed with the California
Secretary of State on December 1, 1983), as
amended on February 16, 1984, February 27, 1984,
March 30, 1984, and May 2, 1984.
3. The undersigned has furnished PHJ&W with a true
and complete copy of the Bylaws of the Company
dated January 27, 1984. The Bylaws, without
amendment, are in full force and effect on the
date hereof.
4. To the best knowledge of the undersigned, no
action or proceeding seeking to revoke, terminate,
wind-up, or dissolve the Company or the Fund has
been taken or commenced.
5. The resolutions of the Directors of the Company,
authorizing the establishment of the Fund and the issuance
of the shares, remain in full force and effect without
amendment or modification through the date hereof.
6. No shareholder of the Company has agreed to pay
anything to or on behalf of the Company with respect to the
Company's shares other than the public offering price
therefor.
Dated: April 27, 1999 /s/
By:________________________________
Michael Kromm
Secretary and Treasurer
Clipper Funds, Inc.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Miscellaneous Information" in Post-Effective Amendment No.
18 under the Securities Act of 1933 and Amendment No. 18 under
the Investment Company Act of 1940 to the Registration Statement
(Form N-1A No. 2-88543, 811-3931) and related Prospectus and Statement
of Additional Information of Clipper Fund, Inc., and to the incorporation
by reference therein of our report dated January 22, 1999 with respect to
the financial statements and financial highlights of Clipper Fund, Inc.
included in its Annual Report for the year ended December 31, 1998 filed
with the Securities and Exchange Commission.
/s/
ERNST & YOUNG LLP
Los Angeles, California
February 26, 1999
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Annual Fund Operating Expenses:
- -------------------------------- ----------------------------------
<S> <C> <S> <C>
Maximum Sales Load 0.0% %
---- -----
Management Fees 1.00%
Maximum Sales Load on Rein 0.0% 12b-1 Fees 0.00%
---- Other:
Deferred Sales Load 0.0% Transfer Agent
---- and Custody 0.04%
Registration 0.00%
Redemption Fee $0.00 Postage 0.00%
----- Other Expenses 0.02%
-----
Exchange Fee N/A
----- Total Fund Operating Expenses 1.06%
-----
Assumed Annual Return: 5.00%
--------------------- -----
<CAPTION>
Computation of Performance Quotations:
Total Return Formula = P(1 + T)n = Ending Redeemable Value of Investment
(T)
Avg Annual
Initial Investment: $10,000.00 Total Return
--------- ------------
<S> <C> <C>
One Year (n): $11920 19.2%
------ -----
Three Year (n): $18563 22.9%
------ -----
Five Year (n): $26261 21.3%
------ -----
Seven Year (n): $33793 19.0%
------ -----
Ten Year (n): $50162 17.5%
------ -----
Since Inception (n): $113832 17.8%
------ -----
12/31/98
02/29/84
Inception Date of the Fund: February 29, 1984 Years: ---> 14.85
<CAPTION>
AMOUNT SALES BEGINNING NET INV ENDING AVERAGE ANNUAL AGGREGATE
INVESTED LOAD VALUE INCOME VALUE VALUE EXPENSES EXPENSES
YEAR (1) (2)=(1)X0 (3)=(1)-(2) (4)=(3)X5% (5)=(3)+(4) (6)=(3)+(5)/2 (7)=(6)(1.06%) (8)
- ---- (-1.06)%
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $10,000.00 $0.00 $10,000.00 $394.00 $10,394.00 $10,197.00 $108.09 $108.09
2 $10,394.00 $409.52 $10,803.52 $10,598.76 $112.35 $220.44
3 $10,803.52 $425.66 $11,229.18 $11,016.25 $116.77 $337.21
4 $11,229.18 $442.43 $11,671.61 $11,450.40 $121.37 $458.58
5 $11,671.61 $459.86 $12,131.47 $11,901.54 $126.16 $584.74
6 $12,131.47 $477.98 $12,609.45 $12,370.46 $131.13 $715.87
7 $12,609.45 $496.81 $13,106.27 $12,857.86 $136.29 $852.16
8 $13,106.27 $516.39 $13,622.65 $13,364.46 $141.66 $993.82
9 $13,622.65 $536.73 $14,159.39 $13,891.02 $147.24 $141.07
10 $14,159.39 $557.88 $14,717.27 $14,438.33 $153.05 $294.11
</TABLE>
